UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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x
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QUARTERLY 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
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Delaware
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77-0192527
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(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
3760 Rocky Mountain Avenue
Loveland, Colorado |
80538
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code: (970) 493-7272
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common stock, $0.01 par value
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HSKA
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The Nasdaq Stock Market LLC
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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 o
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Page
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PART I - FINANCIAL INFORMATION
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II - OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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•
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the impact of the COVID-19 pandemic on consumer demand, our global supply chain and our financial and operational results;
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•
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the success of third parties in marketing our products;
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•
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outside business interests of our Chief Executive Officer;
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•
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our reliance on third party suppliers and collaborative partners;
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•
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our dependence on key personnel;
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•
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our dependence upon a number of significant customers;
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•
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competitive conditions in our industry;
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•
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our ability to market and sell our products successfully;
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•
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expansion of our international operations;
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•
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the impact of regulation on our business;
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•
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the success of our acquisitions and other strategic development opportunities;
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•
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our ability to develop, commercialize and gain market acceptance of our products;
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•
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cybersecurity incidents and related disruptions and our ability to protect our stakeholders’ privacy;
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•
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product returns or liabilities;
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•
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volatility of our stock price;
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•
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our ability to service our convertible notes and comply with their terms.
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March 31,
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December 31,
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||||
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2020
|
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2019
|
||||
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(unaudited)
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|
||||
ASSETS
|
||||||||
Current assets:
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|
|
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||
Cash and cash equivalents
|
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$
|
191,245
|
|
|
$
|
89,030
|
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Accounts receivable, net of allowance for doubtful accounts of $232 and $186, respectively
|
|
14,838
|
|
|
15,161
|
|
||
Inventories, net
|
|
29,056
|
|
|
26,601
|
|
||
Net investment in leases, current, net of allowance for doubtful accounts of $85 and $105, respectively
|
|
4,020
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|
|
3,856
|
|
||
Prepaid expenses
|
|
2,711
|
|
|
2,219
|
|
||
Other current assets
|
|
3,790
|
|
|
3,000
|
|
||
Total current assets
|
|
245,660
|
|
|
139,867
|
|
||
|
|
|
|
|
||||
Property and equipment, net
|
|
15,076
|
|
|
15,469
|
|
||
Operating lease right-of-use assets
|
|
5,404
|
|
|
5,726
|
|
||
Goodwill
|
|
36,095
|
|
|
36,204
|
|
||
Other intangible assets, net
|
|
11,061
|
|
|
11,472
|
|
||
Deferred tax asset, net
|
|
8,027
|
|
|
6,429
|
|
||
Net investment in leases, non-current
|
|
14,373
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|
|
14,307
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|
||
Investments in unconsolidated affiliates
|
|
7,295
|
|
|
7,424
|
|
||
Other non-current assets
|
|
7,990
|
|
|
7,526
|
|
||
Total assets
|
|
$
|
350,981
|
|
|
$
|
244,424
|
|
|
|
|
|
|
||||
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable
|
|
$
|
7,137
|
|
|
$
|
6,600
|
|
Accrued liabilities
|
|
10,091
|
|
|
6,345
|
|
||
Accrued purchase consideration payable
|
|
—
|
|
|
14,579
|
|
||
Current operating lease liabilities
|
|
1,755
|
|
|
1,745
|
|
||
Current portion of deferred revenue, and other
|
|
2,923
|
|
|
2,930
|
|
||
Total current liabilities
|
|
21,906
|
|
|
32,199
|
|
||
|
|
|
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|
||||
Convertible note, long-term, net
|
|
46,872
|
|
|
45,348
|
|
||
Deferred revenue, net of current portion
|
|
5,521
|
|
|
5,966
|
|
||
Other long-term borrowings
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|
1,110
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|
1,121
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|
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Non-current operating lease liabilities
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|
4,092
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|
|
4,413
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||
Deferred tax liability
|
|
678
|
|
|
691
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|
||
Other liabilities
|
|
141
|
|
|
152
|
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||
Total liabilities
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|
80,320
|
|
|
89,890
|
|
||
|
|
|
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|
||||
Redeemable non-controlling interest and mezzanine equity
|
|
23
|
|
|
170
|
|
||
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||||
Stockholders' equity:
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||
Preferred stock, $.01 par value, 2,500,000 and 2,500,000 shares authorized, respectively, 122,000 and 0 shares issued and outstanding, respectively
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1
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|
|
—
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|
||
Common stock, $.01 par value, 10,250,000 and 10,250,000 shares authorized, respectively, none issued or outstanding
|
|
—
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|
|
—
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||
Public common stock, $.01 par value, 10,250,000 and 10,250,000 shares authorized, 7,843,079 and 7,881,928 shares issued and outstanding, respectively
|
|
78
|
|
|
79
|
|
||
Additional paid-in capital
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|
412,152
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|
|
290,216
|
|
||
Accumulated other comprehensive income
|
|
157
|
|
|
513
|
|
||
Accumulated deficit
|
|
(141,750
|
)
|
|
(136,444
|
)
|
||
Total stockholders' equity
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270,638
|
|
|
154,364
|
|
||
Total liabilities, mezzanine equity and stockholders' equity
|
|
$
|
350,981
|
|
|
$
|
244,424
|
|
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Three Months Ended March 31,
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||||||
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2020
|
|
2019
|
||||
Revenue:
|
|
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|
|||
Core companion animal
|
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$
|
27,306
|
|
|
$
|
24,716
|
|
Other vaccines and pharmaceuticals
|
|
3,348
|
|
|
4,795
|
|
||
Total revenue, net
|
|
30,654
|
|
|
29,511
|
|
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|
|
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|
||||
Cost of revenue
|
|
17,206
|
|
|
16,968
|
|
||
|
|
|
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|
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Gross profit
|
|
13,448
|
|
|
12,543
|
|
||
|
|
|
|
|
||||
Operating expenses:
|
|
|
|
|
|
|||
Selling and marketing
|
|
7,380
|
|
|
7,033
|
|
||
Research and development
|
|
2,128
|
|
|
1,366
|
|
||
General and administrative
|
|
8,558
|
|
|
4,219
|
|
||
Total operating expenses
|
|
18,066
|
|
|
12,618
|
|
||
Operating loss
|
|
(4,618
|
)
|
|
(75
|
)
|
||
Interest and other expense (income), net
|
|
2,199
|
|
|
(16
|
)
|
||
Loss before income taxes and equity in losses of unconsolidated affiliates
|
|
(6,817
|
)
|
|
(59
|
)
|
||
Income tax (benefit) expense:
|
|
|
|
|
|
|||
Current income tax expense
|
|
25
|
|
|
45
|
|
||
Deferred income tax benefit
|
|
(1,533
|
)
|
|
(1,055
|
)
|
||
Total income tax benefit
|
|
(1,508
|
)
|
|
(1,010
|
)
|
||
|
|
|
|
|
||||
Net (loss) income before equity in losses of unconsolidated affiliates
|
|
(5,309
|
)
|
|
951
|
|
||
Equity in losses of unconsolidated affiliates
|
|
(130
|
)
|
|
(181
|
)
|
||
Net (loss) income after equity in losses of unconsolidated affiliates
|
|
(5,439
|
)
|
|
770
|
|
||
Net loss attributable to redeemable non-controlling interest
|
|
(151
|
)
|
|
(44
|
)
|
||
Net (loss) income attributable to Heska Corporation
|
|
$
|
(5,288
|
)
|
|
$
|
814
|
|
|
|
|
|
|
||||
Basic (loss) earnings per share attributable to Heska Corporation
|
|
$
|
(0.70
|
)
|
|
$
|
0.11
|
|
Diluted (loss) earnings per share attributable to Heska Corporation
|
|
$
|
(0.70
|
)
|
|
$
|
0.10
|
|
|
|
|
|
|
||||
Weighted average outstanding shares used to compute basic (loss) earnings per share attributable to Heska Corporation
|
|
7,568
|
|
|
7,459
|
|
||
Weighted average outstanding shares used to compute diluted (loss) earnings per share attributable to Heska Corporation
|
|
7,568
|
|
|
7,965
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Net (loss) income after equity in losses of unconsolidated affiliates
|
|
$
|
(5,439
|
)
|
|
$
|
770
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|||
Foreign currency translation
|
|
(356
|
)
|
|
(62
|
)
|
||
Comprehensive (loss) income
|
|
(5,795
|
)
|
|
708
|
|
||
|
|
|
|
|
||||
Comprehensive loss attributable to redeemable non-controlling interest
|
|
(151
|
)
|
|
(44
|
)
|
||
Comprehensive (loss) income attributable to Heska Corporation
|
|
$
|
(5,644
|
)
|
|
$
|
752
|
|
|
|
Preferred Stock |
|
Common Stock |
|
Additional Paid-in Capital |
|
Accumulated
Other Comprehensive Income |
|
Accumulated Deficit |
|
Total Stockholders' Equity |
||||||||||||||||||
Three Months Ended March 31, 2019 and 2020
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|||||||||||||||||||||
Balances, December 31, 2018
|
|
—
|
|
|
$
|
—
|
|
|
7,676
|
|
|
$
|
77
|
|
|
$
|
257,034
|
|
|
$
|
277
|
|
|
$
|
(134,979
|
)
|
|
$
|
122,409
|
|
Net income attributable to Heska Corporation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
814
|
|
|
814
|
|
||||||
Issuance of common stock, net of shares withheld for employee taxes
|
|
—
|
|
|
—
|
|
|
71
|
|
|
—
|
|
|
(3,070
|
)
|
|
—
|
|
|
—
|
|
|
(3,070
|
)
|
||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,186
|
|
|
—
|
|
|
—
|
|
|
1,186
|
|
||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(62
|
)
|
|
—
|
|
|
(62
|
)
|
||||||
Balances, March 31, 2019
|
|
—
|
|
|
—
|
|
|
7,747
|
|
|
$
|
77
|
|
|
$
|
255,150
|
|
|
$
|
215
|
|
|
$
|
(134,165
|
)
|
|
$
|
121,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balances, December 31, 2019
|
|
—
|
|
|
—
|
|
|
7,882
|
|
|
$
|
79
|
|
|
$
|
290,216
|
|
|
$
|
513
|
|
|
$
|
(136,444
|
)
|
|
$
|
154,364
|
|
|
Adoption of accounting standards
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
(18
|
)
|
||||||
Balances, January 1, 2020, as adjusted
|
|
—
|
|
|
—
|
|
|
7,882
|
|
|
79
|
|
|
290,216
|
|
|
513
|
|
|
(136,462
|
)
|
|
154,346
|
|
||||||
Net loss attributable to Heska Corporation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,288
|
)
|
|
(5,288
|
)
|
||||||
Issuance of common stock, net of shares withheld for employee taxes
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
|
(1
|
)
|
|
(201
|
)
|
|
—
|
|
|
-
|
|
|
(202
|
)
|
||||||
Issuance of preferred stock, net of issuance costs
|
|
122
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
121,784
|
|
|
—
|
|
|
-
|
|
|
121,785
|
|
||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
353
|
|
|
—
|
|
|
-
|
|
|
353
|
|
||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(356
|
)
|
|
-
|
|
|
(356
|
)
|
||||||
Balances, March 31, 2020
|
|
122
|
|
|
$
|
1
|
|
|
7,843
|
|
|
$
|
78
|
|
|
$
|
412,152
|
|
|
$
|
157
|
|
|
$
|
(141,750
|
)
|
|
$
|
270,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Note: Excludes amounts related to redeemable non-controlling interests recorded in mezzanine equity.
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2020
|
|
2019
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net (loss) income after equity in losses from unconsolidated affiliates
|
|
$
|
(5,439
|
)
|
|
$
|
770
|
|
Adjustments to reconcile net income to cash (used in) provided by operating activities:
|
|
|
|
|
|
|
||
Depreciation and amortization
|
|
1,374
|
|
|
1,265
|
|
||
Non-cash impact of operating leases
|
|
408
|
|
|
375
|
|
||
Deferred income tax benefit
|
|
(1,533
|
)
|
|
(1,055
|
)
|
||
Stock-based compensation
|
|
353
|
|
|
1,186
|
|
||
Equity in losses of unconsolidated affiliates
|
|
130
|
|
|
181
|
|
||
Amortization of debt discount and issuance costs
|
|
1,524
|
|
|
10
|
|
||
Other losses
|
|
42
|
|
|
—
|
|
||
Changes in operating assets and liabilities (net of the effect of acquisitions):
|
|
|
|
|
|
|
||
Accounts receivable
|
|
(1,092
|
)
|
|
624
|
|
||
Inventories
|
|
(3,081
|
)
|
|
(1,052
|
)
|
||
Lease receivable, current
|
|
(196
|
)
|
|
(237
|
)
|
||
Other current assets
|
|
(23
|
)
|
|
(151
|
)
|
||
Accounts payable
|
|
837
|
|
|
(110
|
)
|
||
Due to related parties
|
|
—
|
|
|
(226
|
)
|
||
Accrued liabilities and other
|
|
2,642
|
|
|
39
|
|
||
Lease receivable, non-current
|
|
(74
|
)
|
|
(668
|
)
|
||
Other non-current assets
|
|
(136
|
)
|
|
101
|
|
||
Deferred revenue and other
|
|
(497
|
)
|
|
(325
|
)
|
||
Net cash (used in) provided by operating activities
|
|
(4,761
|
)
|
|
727
|
|
||
Cash flows from investing activities:
|
|
|
|
|
||||
Investment in subsidiary, net of cash acquired
|
|
—
|
|
|
(224
|
)
|
||
Acquisition of CVM
|
|
(14,420
|
)
|
|
—
|
|
||
Purchases of property and equipment
|
|
(210
|
)
|
|
(234
|
)
|
||
Net cash used in investing activities
|
|
(14,630
|
)
|
|
(458
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
||||
Payment of preferred stock issuance costs
|
|
(158
|
)
|
|
—
|
|
||
Preferred stock proceeds
|
|
122,000
|
|
|
—
|
|
||
Proceeds from issuance of common stock
|
|
336
|
|
|
410
|
|
||
Repurchase of common stock
|
|
(538
|
)
|
|
(3,480
|
)
|
||
Repayments of other debt
|
|
(10
|
)
|
|
(1,486
|
)
|
||
Net cash provided by (used in) financing activities
|
|
121,630
|
|
|
(4,556
|
)
|
||
Foreign exchange effect on cash, cash equivalents and restricted cash
|
|
(24
|
)
|
|
(1
|
)
|
||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
|
102,215
|
|
|
(4,288
|
)
|
||
Cash, cash equivalents and restricted cash, beginning of period
|
|
89,030
|
|
|
13,389
|
|
||
Cash, cash equivalents and restricted cash, end of period
|
|
$
|
191,245
|
|
|
$
|
9,101
|
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
||||
Non-cash transfers of equipment between inventory and property and equipment, net
|
|
$
|
553
|
|
|
$
|
227
|
|
Accrued preferred stock issuance costs
|
|
$
|
56
|
|
|
$
|
—
|
|
•
|
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.
|
•
|
Contract manufacturing agreements; and
|
•
|
Other license, research and development revenue.
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Point of Care laboratory revenue:
|
$
|
17,096
|
|
|
$
|
15,961
|
|
Consumables
|
14,248
|
|
|
12,317
|
|
||
Sales-type leases
|
1,244
|
|
|
1,742
|
|
||
Outright instrument sales
|
1,205
|
|
|
1,528
|
|
||
Other
|
399
|
|
|
374
|
|
||
|
|
|
|
||||
Point of Care imaging revenue:
|
4,855
|
|
|
5,410
|
|
||
Outright instrument sales
|
4,055
|
|
|
4,546
|
|
||
Other
|
800
|
|
|
864
|
|
||
|
|
|
|
||||
Other CCA revenue:
|
5,355
|
|
|
3,345
|
|
||
Other pharmaceuticals, vaccines and diagnostic tests
|
5,329
|
|
|
3,246
|
|
||
Research and development, license and royalty revenue
|
26
|
|
|
99
|
|
||
|
|
|
|
||||
Total CCA revenue
|
$
|
27,306
|
|
|
$
|
24,716
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Contract manufacturing
|
$
|
3,191
|
|
|
$
|
4,666
|
|
License, research and development
|
157
|
|
|
129
|
|
||
Total OVP revenue
|
$
|
3,348
|
|
|
$
|
4,795
|
|
Year Ending December 31,
|
Revenue
|
||
2020 (remaining)
|
$
|
21,055
|
|
2021
|
25,661
|
|
|
2022
|
22,458
|
|
|
2023
|
19,697
|
|
|
2024
|
15,470
|
|
|
Thereafter
|
17,747
|
|
|
|
$
|
122,088
|
|
Purchase Price
|
December 5, 2019
|
||
Consideration payable to former owners
|
$
|
14,420
|
|
Total
|
$
|
14,420
|
|
Net Assets Acquired
|
|
||
Cash and cash equivalents
|
1,226
|
|
|
Accounts receivable
|
582
|
|
|
Inventories
|
1,750
|
|
|
Other current assets
|
1,186
|
|
|
Property and equipment
|
260
|
|
|
Other intangible assets
|
2,608
|
|
|
Other non-current assets
|
460
|
|
|
Accounts payable
|
(553
|
)
|
|
Current portion of deferred revenue, and other
|
(67
|
)
|
|
Deferred tax liability
|
(683
|
)
|
|
Other long-term borrowings
|
(1,109
|
)
|
|
Other liabilities
|
(157
|
)
|
|
Total fair value of net assets acquired
|
5,503
|
|
|
Goodwill
|
8,917
|
|
|
Total fair value of consideration transferred
|
$
|
14,420
|
|
|
Useful Life
|
|
Amortization Method
|
|
Fair Value
|
Customer relationships
|
6 years
|
|
Straight-line
|
|
$2,440
|
Trade name
|
4 years
|
|
Straight-line
|
|
$111
|
|
Three Months Ended March 31, 2019
|
||
Total revenue, net
|
$
|
31,621
|
|
Net income attributable to Heska Corporation
|
686
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Equity method investment
|
$
|
4,277
|
|
|
$
|
4,406
|
|
Non-marketable equity security investment
|
3,018
|
|
|
3,018
|
|
||
|
$
|
7,295
|
|
|
$
|
7,424
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Loss before income taxes and equity in losses of unconsolidated affiliates
|
|
$
|
(6,817
|
)
|
|
$
|
(59
|
)
|
Total income tax benefit
|
|
(1,508
|
)
|
|
(1,010
|
)
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Cash paid for amounts included in the measurement of operating lease liabilities
|
$
|
460
|
|
|
$
|
444
|
|
ROU assets obtained in exchange for operating lease obligations
|
98
|
|
|
293
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||
Weighted average remaining lease term
|
3.6 years
|
|
|
3.8 years
|
|
Weighted average discount rate
|
4.44
|
%
|
|
4.44
|
%
|
Year Ending December 31,
|
|
||
Remainder of 2020
|
$
|
1,451
|
|
2021
|
1,608
|
|
|
2022
|
1,411
|
|
|
2023
|
1,795
|
|
|
2024
|
30
|
|
|
Thereafter
|
57
|
|
|
Total operating lease payments
|
6,352
|
|
|
Less: imputed interest
|
505
|
|
|
Total operating lease liabilities
|
$
|
5,847
|
|
Year Ending December 31,
|
|
||
Remainder of 2020
|
$
|
3,101
|
|
2021
|
4,209
|
|
|
2022
|
3,888
|
|
|
2023
|
3,182
|
|
|
2024
|
2,308
|
|
|
Thereafter
|
1,705
|
|
|
|
$
|
18,393
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Net (loss) income attributable to Heska Corporation
|
$
|
(5,288
|
)
|
|
$
|
814
|
|
|
|
|
|
||||
Basic weighted-average common shares outstanding
|
7,568
|
|
|
7,459
|
|
||
Assumed exercise of dilutive stock options and restricted shares
|
—
|
|
|
506
|
|
||
Diluted weighted-average common shares outstanding
|
$
|
7,568
|
|
|
$
|
7,965
|
|
|
|
|
|
||||
Basic (loss) earnings per share attributable to Heska Corporation
|
$
|
(0.70
|
)
|
|
$
|
0.11
|
|
Diluted (loss) earnings per share attributable to Heska Corporation
|
$
|
(0.70
|
)
|
|
$
|
0.10
|
|
|
Three Months Ended March 31,
|
||||
|
2020
|
|
2019
|
||
Convertible preferred stock
|
1,509
|
|
|
—
|
|
Convertible senior notes
|
43
|
|
|
—
|
|
Stock options and restricted stock
|
135
|
|
|
86
|
|
|
1,687
|
|
|
86
|
|
Carrying amount, December 31, 2019
|
$
|
36,204
|
|
Goodwill attributable to acquisitions
|
68
|
|
|
Foreign currency adjustments
|
(177
|
)
|
|
Carrying amount, March 31, 2020
|
$
|
36,095
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||||||||
Developed technology
|
$
|
8,269
|
|
|
$
|
(1,026
|
)
|
|
$
|
7,243
|
|
|
$
|
8,200
|
|
|
$
|
(819
|
)
|
|
$
|
7,381
|
|
Customer relationships and other
|
6,265
|
|
|
(2,447
|
)
|
|
3,818
|
|
|
6,317
|
|
|
(2,226
|
)
|
|
4,091
|
|
||||||
Total intangible assets
|
$
|
14,534
|
|
|
$
|
(3,473
|
)
|
|
$
|
11,061
|
|
|
$
|
14,517
|
|
|
$
|
(3,045
|
)
|
|
$
|
11,472
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Amortization expense
|
$
|
428
|
|
|
$
|
303
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Land
|
$
|
694
|
|
|
$
|
694
|
|
Building
|
3,845
|
|
|
3,845
|
|
||
Machinery and equipment
|
28,294
|
|
|
28,777
|
|
||
Office furniture and equipment
|
1,348
|
|
|
1,345
|
|
||
Computer hardware and software
|
3,333
|
|
|
3,408
|
|
||
Leasehold and building improvements
|
10,566
|
|
|
10,558
|
|
||
Construction in progress
|
753
|
|
|
671
|
|
||
Property and equipment, gross
|
48,833
|
|
|
49,298
|
|
||
Less accumulated depreciation
|
(33,757
|
)
|
|
(33,829
|
)
|
||
Total property and equipment, net
|
$
|
15,076
|
|
|
$
|
15,469
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Raw materials
|
$
|
15,868
|
|
|
$
|
15,320
|
|
Work in process
|
3,595
|
|
|
2,802
|
|
||
Finished goods
|
10,961
|
|
|
9,786
|
|
||
Allowance for excess or obsolete inventory
|
(1,368
|
)
|
|
(1,307
|
)
|
||
Total inventory, net
|
$
|
29,056
|
|
|
$
|
26,601
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Accrued payroll and employee benefits
|
1,262
|
|
|
1,175
|
|
||
Accrued property taxes
|
913
|
|
|
681
|
|
||
Accrued purchase orders
|
466
|
|
|
739
|
|
||
Inventory in transit
|
2,925
|
|
|
—
|
|
||
Other
|
4,525
|
|
|
3,750
|
|
||
Total accrued liabilities
|
$
|
10,091
|
|
|
$
|
6,345
|
|
|
Three Months Ended March 31,
|
||
|
2020
|
|
2019
|
Risk-free interest rate
|
0.72%
|
|
2.45%
|
Expected lives
|
4.5 years
|
|
4.7 years
|
Expected volatility
|
39%
|
|
39%
|
Expected dividend yield
|
0%
|
|
0%
|
|
Three Months Ended March 31,
|
|
Year Ended December 31,
|
||||||||||
|
2020
|
|
2019
|
||||||||||
|
Options
|
|
Weighted Average Exercise Price
|
|
Options |
|
Weighted Average Exercise Price
|
||||||
Outstanding at beginning of period
|
536,315
|
|
|
$
|
54.855
|
|
|
620,553
|
|
|
$
|
40.741
|
|
Granted at market
|
250
|
|
|
$
|
95.660
|
|
|
88,200
|
|
|
$
|
84.234
|
|
Forfeited
|
(35,641
|
)
|
|
$
|
70.546
|
|
|
(1,353
|
)
|
|
$
|
98.660
|
|
Expired
|
(1,051
|
)
|
|
$
|
98.660
|
|
|
(716
|
)
|
|
$
|
98.660
|
|
Exercised
|
(10,483
|
)
|
|
$
|
8.779
|
|
|
(170,369
|
)
|
|
$
|
18.125
|
|
Outstanding at end of period
|
489,390
|
|
|
$
|
54.626
|
|
|
536,315
|
|
|
$
|
54.855
|
|
Exercisable at end of period
|
339,845
|
|
|
$
|
41.893
|
|
|
315,964
|
|
|
$
|
37.644
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||
Exercise Prices
|
|
Number of
Options Outstanding at March 31, 2020 |
|
Weighted
Average
Remaining
Contractual
Life in Years
|
|
Weighted
Average
Exercise
Price
|
|
Number of
Options Exercisable at March 31, 2020 |
|
Weighted
Average
Exercise
Price
|
||||||
4.96-7.36
|
|
78,733
|
|
|
2.72
|
|
$
|
7.022
|
|
|
78,733
|
|
|
$
|
7.022
|
|
7.37-62.50
|
|
123,943
|
|
|
3.72
|
|
$
|
26.115
|
|
|
123,838
|
|
|
$
|
26.088
|
|
62.51-69.77
|
|
101,668
|
|
|
6.90
|
|
$
|
69.770
|
|
|
71,669
|
|
|
$
|
69.770
|
|
69.78-72.85
|
|
84,391
|
|
|
6.67
|
|
$
|
72.237
|
|
|
41,779
|
|
|
$
|
72.850
|
|
72.86-108.25
|
|
100,655
|
|
|
8.77
|
|
$
|
96.909
|
|
|
23,826
|
|
|
$
|
101.137
|
|
4.96-108.25
|
|
489,390
|
|
|
5.77
|
|
$
|
54.626
|
|
|
339,845
|
|
|
$
|
41.893
|
|
|
Three Months Ended March 31,
|
||
|
2020
|
|
2019
|
Risk-free interest rate
|
1.34%
|
|
2.35%
|
Expected lives
|
1.1 years
|
|
1.1 years
|
Expected volatility
|
44%
|
|
40%
|
Expected dividend yield
|
0%
|
|
0%
|
|
RSAs
|
|
Weighted-Average Grant Date Fair Value Per Award
|
|||
Non-vested as of December 31, 2019
|
335,667
|
|
|
$
|
74.29
|
|
Granted
|
250
|
|
|
86.57
|
|
|
Vested
|
(16,894
|
)
|
|
48.77
|
|
|
Forfeited
|
(46,000
|
)
|
|
64.59
|
|
|
Non-vested as of March 31, 2020
|
273,023
|
|
|
$
|
77.44
|
|
|
Minimum Pension Liability
|
|
Foreign Currency Translation
|
|
Total Accumulated Other Comprehensive Income
|
||||||
Balances at December 31, 2019
|
$
|
(346
|
)
|
|
$
|
859
|
|
|
$
|
513
|
|
Current period other comprehensive loss
|
—
|
|
|
(356
|
)
|
|
(356
|
)
|
|||
Balances at March 31, 2020
|
$
|
(346
|
)
|
|
$
|
503
|
|
|
$
|
157
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Interest income
|
$
|
(233
|
)
|
|
$
|
(92
|
)
|
Interest expense
|
2,346
|
|
|
77
|
|
||
Other expense (income), net
|
86
|
|
|
(1
|
)
|
||
Total interest and other expense (income), net
|
$
|
2,199
|
|
|
$
|
(16
|
)
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Carrying amount of equity component
|
$
|
39,508
|
|
|
$
|
39,508
|
|
|
|
|
|
||||
Principal amount of the Notes
|
86,250
|
|
|
86,250
|
|
||
Unamortized debt discount
|
(39,378
|
)
|
|
(40,902
|
)
|
||
Net carrying amount
|
$
|
46,872
|
|
|
$
|
45,348
|
|
|
Three Months Ended
|
||
|
March 31, 2020
|
||
Interest expense related to contractual coupon interest
|
$
|
809
|
|
Interest expense related to amortization of the debt discount
|
1,524
|
|
|
|
$
|
2,333
|
|
Three Months Ended March 31, 2020
|
|
Core Companion Animal
|
|
Other Vaccines and Pharmaceuticals
|
|
Total |
||||||
Total revenue
|
|
$
|
27,306
|
|
|
$
|
3,348
|
|
|
$
|
30,654
|
|
Operating loss
|
|
(4,180
|
)
|
|
(438
|
)
|
|
(4,618
|
)
|
|||
Loss before income taxes
|
|
(6,379
|
)
|
|
(438
|
)
|
|
(6,817
|
)
|
|||
Capital expenditures
|
|
128
|
|
|
82
|
|
|
210
|
|
|||
Depreciation and amortization
|
|
1,042
|
|
|
332
|
|
|
1,374
|
|
Three Months Ended March 31, 2019
|
|
Core Companion Animal
|
|
Other Vaccines and Pharmaceuticals
|
|
Total |
||||||
Total revenue
|
|
$
|
24,716
|
|
|
$
|
4,795
|
|
|
$
|
29,511
|
|
Operating loss
|
|
(51
|
)
|
|
(24
|
)
|
|
(75
|
)
|
|||
Loss before income taxes
|
|
(35
|
)
|
|
(24
|
)
|
|
(59
|
)
|
|||
Capital expenditures
|
|
44
|
|
|
190
|
|
|
234
|
|
|||
Depreciation and amortization
|
|
947
|
|
|
318
|
|
|
1,265
|
|
As of March 31, 2020
|
|
Core Companion Animal
|
|
Other Vaccines and Pharmaceuticals
|
|
Total
|
||||||
Investments in unconsolidated affiliates
|
|
$
|
7,295
|
|
|
$
|
—
|
|
|
$
|
7,295
|
|
Total assets
|
|
331,932
|
|
|
19,049
|
|
|
350,981
|
|
|||
Net assets
|
|
255,237
|
|
|
15,401
|
|
|
270,638
|
|
As of December 31, 2019
|
|
Core Companion Animal
|
|
Other Vaccines and Pharmaceuticals
|
|
Total
|
||||||
Investments in unconsolidated affiliates
|
|
$
|
7,424
|
|
|
$
|
—
|
|
|
$
|
7,424
|
|
Total assets
|
|
223,980
|
|
|
20,444
|
|
|
244,424
|
|
|||
Net assets
|
|
137,072
|
|
|
17,292
|
|
|
154,364
|
|
|
April 1, 2020
|
||
Total purchase consideration
|
$
|
111,027
|
|
|
|
||
Current assets, including cash acquired
|
18,255
|
|
|
Inventories, net
|
11,373
|
|
|
Property and equipment, net
|
19,373
|
|
|
Other intangible assets, net
|
44,267
|
|
|
Deferred tax asset, net
|
1,013
|
|
|
Investments in unconsolidated affiliates
|
55
|
|
|
Other assets
|
1,365
|
|
|
Total assets
|
95,701
|
|
|
Current Liabilities
|
16,189
|
|
|
Current portion of deferred revenue
|
1,035
|
|
|
Deferred revenue, net of current portion
|
234
|
|
|
Deferred tax liability
|
13,023
|
|
|
Other liabilities
|
798
|
|
|
Net assets acquired
|
64,422
|
|
|
Goodwill
|
46,605
|
|
|
Total fair value of consideration transferred
|
$
|
111,027
|
|
|
Year Ended
December 31, 2019
|
||
Total revenue, net
|
$
|
201,865
|
|
Net (loss) attributable to Heska Corporation
|
(2,568
|
)
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Revenue
|
$
|
30,654
|
|
|
$
|
29,511
|
|
Gross profit
|
13,448
|
|
|
12,543
|
|
||
Operating expenses
|
18,066
|
|
|
12,618
|
|
||
Operating loss
|
(4,618
|
)
|
|
(75
|
)
|
||
Interest and other expense (income), net
|
2,199
|
|
|
(16
|
)
|
||
Loss before income taxes and equity in losses of unconsolidated affiliates
|
(6,817
|
)
|
|
(59
|
)
|
||
Income tax benefit
|
(1,508
|
)
|
|
(1,010
|
)
|
||
Net (loss) income before equity in losses of unconsolidated affiliates
|
(5,309
|
)
|
|
951
|
|
||
Equity in losses of unconsolidated affiliates
|
(130
|
)
|
|
(181
|
)
|
||
Net (loss) income after equity in losses of unconsolidated affiliates
|
(5,439
|
)
|
|
770
|
|
||
Net loss attributable to redeemable non-controlling interest
|
(151
|
)
|
|
(44
|
)
|
||
Net (loss) income attributable to Heska Corporation
|
$
|
(5,288
|
)
|
|
$
|
814
|
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
|
2020
|
|
2019
|
|
Dollar Change
|
|
% Change
|
|||||||
Point of Care laboratory:
|
$
|
17,096
|
|
|
$
|
15,961
|
|
|
$
|
1,135
|
|
|
7.1
|
%
|
Consumables
|
14,248
|
|
|
12,317
|
|
|
1,931
|
|
|
15.7
|
%
|
|||
Instruments
|
2,449
|
|
|
3,270
|
|
|
(821
|
)
|
|
(25.1
|
)%
|
|||
Other
|
399
|
|
|
374
|
|
|
25
|
|
|
6.7
|
%
|
|||
Point of Care imaging
|
4,855
|
|
|
5,410
|
|
|
(555
|
)
|
|
(10.3
|
)%
|
|||
Other CCA revenue
|
5,355
|
|
|
3,345
|
|
|
2,010
|
|
|
60.1
|
%
|
|||
Total CCA revenue
|
$
|
27,306
|
|
|
$
|
24,716
|
|
|
$
|
2,590
|
|
|
10.5
|
%
|
Percent of total revenue
|
89.1
|
%
|
|
83.8
|
%
|
|
|
|
|
|||||
Cost of revenue
|
13,937
|
|
|
12,622
|
|
|
1,315
|
|
|
10.4
|
%
|
|||
Gross profit
|
13,369
|
|
|
12,094
|
|
|
1,275
|
|
|
10.5
|
%
|
|||
Operating loss
|
$
|
(4,180
|
)
|
|
$
|
(51
|
)
|
|
$
|
(4,129
|
)
|
|
8,096.1
|
%
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
|
2020
|
|
2019
|
|
Dollar
Change
|
|
%
Change
|
|||||||
Revenue
|
$
|
3,348
|
|
|
$
|
4,795
|
|
|
$
|
(1,447
|
)
|
|
(30.2
|
)%
|
Percent of total revenue
|
10.9
|
%
|
|
16.2
|
%
|
|
|
|
|
|||||
Cost of revenue
|
3,269
|
|
|
4,346
|
|
|
(1,077
|
)
|
|
(24.8
|
)%
|
|||
Gross profit
|
79
|
|
|
449
|
|
|
(370
|
)
|
|
(82.4
|
)%
|
|||
Operating loss
|
$
|
(438
|
)
|
|
$
|
(24
|
)
|
|
$
|
(414
|
)
|
|
1,725.0
|
%
|
|
Three Months Ended
March 31,
|
||||||
|
2020
|
|
2019
|
||||
Net (loss) income attributable to Heska Corporation
|
$
|
(5,288
|
)
|
|
$
|
814
|
|
Income tax benefit
|
(1,508
|
)
|
|
(1,010
|
)
|
||
Interest expense (income)
|
2,113
|
|
|
(15
|
)
|
||
Depreciation and amortization
|
1,374
|
|
|
1,265
|
|
||
EBITDA
|
$
|
(3,309
|
)
|
|
$
|
1,054
|
|
Acquisition-related and other one-time costs(1)
|
3,874
|
|
|
—
|
|
||
Stock-based compensation
|
353
|
|
|
1,186
|
|
||
Adjusted EBITDA
|
$
|
918
|
|
|
$
|
2,240
|
|
Adjusted EBITDA margin(2)
|
3.0
|
%
|
|
7.6
|
%
|
|
Three Months Ended
March 31,
|
||||||
|
2020
|
|
2019
|
||||
GAAP net (loss) income attributable to Heska per diluted share
|
$
|
(0.70
|
)
|
|
$
|
0.10
|
|
Acquisition-related and other one-time costs(1)
|
0.51
|
|
|
—
|
|
||
Amortization of acquired intangibles(2)
|
0.02
|
|
|
—
|
|
||
Amortization of debt discount and issuance costs
|
0.20
|
|
|
—
|
|
||
Stock-based compensation
|
0.05
|
|
|
0.15
|
|
||
Gain (loss) on equity investee transactions
|
0.02
|
|
|
0.02
|
|
||
Estimated income tax effect of above non-GAAP adjustments(3)
|
(0.20
|
)
|
|
(0.04
|
)
|
||
Discrete tax benefits associated with stock-based compensation activity
|
(0.04
|
)
|
|
(0.14
|
)
|
||
Non-GAAP net (loss) income per diluted share
|
$
|
(0.14
|
)
|
|
$
|
0.09
|
|
|
|
|
|
||||
Shares used in diluted per share calculations
|
7,568
|
|
|
7,965
|
|
|
Three Months Ended
March 31, |
|
Change
|
|||||||||||
|
2020
|
|
2019
|
|
Dollar
Change |
|
%
Change |
|||||||
Net cash (used in) provided by operating activities
|
$
|
(4,761
|
)
|
|
$
|
727
|
|
|
$
|
(5,488
|
)
|
|
(754.9
|
)%
|
Net cash used in investing activities
|
(14,630
|
)
|
|
(458
|
)
|
|
(14,172
|
)
|
|
3,094.3
|
%
|
|||
Net cash provided by (used in) financing activities
|
121,630
|
|
|
(4,556
|
)
|
|
126,186
|
|
|
(2,769.7
|
)%
|
|||
Foreign exchange effect on cash, cash equivalents and restricted cash
|
(24
|
)
|
|
(1
|
)
|
|
(23
|
)
|
|
2,300.0
|
%
|
|||
Increase (decrease) in cash, cash equivalents and restricted cash
|
102,215
|
|
|
(4,288
|
)
|
|
106,503
|
|
|
(2,483.7
|
)%
|
|||
Cash, cash equivalents and restricted cash, beginning of the period
|
89,030
|
|
|
13,389
|
|
|
75,641
|
|
|
564.9
|
%
|
|||
Cash, cash equivalents and restricted cash, end of the period
|
$
|
191,245
|
|
|
$
|
9,101
|
|
|
$
|
182,144
|
|
|
2,001.4
|
%
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1A.
|
Risk Factors
|
•
|
Temporary closure or reduced hours of veterinary clinics where we sell our products and services, resulting in decreased visits and testing;
|
•
|
Reduction in consumer discretionary spending on their pets’ health and wellbeing;
|
•
|
Potential supply chain disruption caused by additional customs restrictions of cross border trade;
|
•
|
Governmental orders that create an array of restrictions on our customers, our employees and the pets they serve to limit the spread of the COVID-19 pandemic;
|
•
|
Lower productivity due to reduced travel, work from home policies or shelter in place orders; and
|
•
|
Overall slowdown in foreign and domestic economies resulting in stagnating wage growth, reduced discretionary spending and temporary or permanent staffing layoffs.
|
|
Exhibit Number
|
|
Notes
|
|
Description of Document
|
|
2.1#++
|
|
(1)
|
|
|
|
2.2#
|
|
(2)
|
|
|
|
3.1#
|
|
(2)
|
|
|
|
3.2
|
|
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
10.3#
|
|
(1)
|
|
|
|
10.4
|
|
(2)
|
|
|
|
10.5#
|
|
(2)
|
|
|
|
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
|
|
*
|
Furnished and not filed herewith.
|
++
|
Certain confidential information contained in this exhibit has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
#
|
Certain personally identifiable information has been omitted from this exhibit pursuant to Item 601(a)(6) under Regulation S-K.
|
(1)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2019.
|
(2)
|
Filed with the Registrant's Form 8-K on April 1, 2020.
|
|
HESKA CORPORATION
|
|
|
|
By: /s/ KEVIN S. WILSON
Kevin S. Wilson
Chief Executive Officer and President
(Principal Executive Officer)
|
|
By: /s/ CATHERINE GRASSMAN
Catherine Grassman
Executive Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
|
1.
|
This Certificate of Amendment to the Corporation’s Restated Certificate of Incorporation, as amended (the "Certificate"), has been duly adopted in accordance with the provisions of Section 242 of the DGCL.
|
2.
|
This Certificate of Amendment to the Certificate amends Article IV of the Certificate by deleting the existing Paragraph A of Article IV in its entirety and substituting therefore a new Paragraph A of Article IV, to read in its entirety as follows:
|
3.
|
This Certificate of Amendment to the Certificate shall become effective at the time this Certificate of Amendment to the Certificate is filed with the Secretary of State of the State of Delaware.
|
ARTICLE 1. INTRODUCTION
|
4
|
|
|
|
|
|
|
ARTICLE 2. ADMINISTRATION
|
4
|
|
|
2.1
|
Committee Composition
|
4
|
|
2.2
|
Committee Responsibilities
|
4
|
|
2.3
|
Indemnification
|
5
|
|
2.4
|
Beneficiary Designations
|
5
|
|
|
|
|
|
ARTICLE 3. SHARES AVAILABLE FOR GRANTS
|
5
|
|
|
3.1
|
Basic Limitation
|
5
|
|
3.2
|
Additional Shares
|
5
|
|
3.3
|
Minimum Vesting Requirements
|
5
|
|
3.4
|
Limitation on Outside Director Compensation
|
6
|
|
3.5
|
Per-Participant Annual Award Limits
|
6
|
|
|
|
|
|
ARTICLE 4. ELIGIBILITY
|
6
|
|
|
4.1
|
Awards other than ISOs
|
6
|
|
4.2
|
Incentive Stock Options
|
6
|
|
|
|
|
|
ARTICLE 5. OPTIONS
|
6
|
|
|
5.1
|
Stock Option Agreement
|
6
|
|
5.2
|
Number of Shares
|
6
|
|
5.3
|
Exercise Price
|
6
|
|
5.4
|
Incentive Stock Options
|
6
|
|
5.5
|
Exercisability
|
7
|
|
5.6
|
Option Term
|
7
|
|
5.7
|
Effect of Change in Control
|
8
|
|
5.8
|
Modification or Assumption of Options
|
8
|
|
5.9
|
Payment for Option Shares
|
8
|
|
|
|
|
|
ARTICLE 6. RESTRICTED SHARES
|
8
|
|
|
6.1
|
Time, Amount and Form of Awards
|
8
|
|
6.2
|
Payment for Awards
|
9
|
|
6.3
|
Vesting Conditions
|
9
|
|
6.4
|
Voting and Dividend Rights
|
9
|
|
|
|
|
|
ARTICLE 7. RESTRICTED STOCK UNITS
|
9
|
|
|
7.1
|
Time, Amount and Form of Awards
|
9
|
|
7.2
|
Restrictions and Conditions
|
9
|
|
7.3
|
Rights as a Stockholder
|
10
|
|
7.4
|
Settlement of Restricted Stock Units
|
10
|
|
|
|
|
|
ARTICLE 8. STOCK APPRECIATION RIGHTS
|
10
|
|
8.1
|
In General
|
10
|
|
8.2
|
Rights as Stockholder
|
10
|
|
8.3
|
Exercisability
|
10
|
|
8.4
|
Payment Upon Exercise
|
11
|
|
8.5
|
Termination of Employment or Service
|
11
|
|
8.6
|
Term
|
11
|
|
8.7
|
Modification of Stock Appreciation Rights
|
11
|
|
|
|
||
ARTICLE 9. OTHER STOCK-BASED OR CASH BASED AWARDS
|
11
|
|
|
9.1
|
In General
|
11
|
|
9.2
|
Vesting
|
12
|
|
|
|
|
|
ARTICLE 10. PERFORMANCE MEASURES
|
12
|
|
|
10.1
|
In General
|
12
|
|
10.2
|
Performance Goals
|
12
|
|
|
|
|
|
ARTICLE 11. CLAWBACK
|
14
|
|
|
|
|
|
|
ARTICLE 12. PROTECTION AGAINST DILUTION
|
15
|
|
|
12.1
|
Adjustments
|
15
|
|
12.2
|
Dissolution or Liquidation
|
15
|
|
12.3
|
Reorganizations
|
15
|
|
|
|
|
|
ARTICLE 13. AWARDS UNDER OTHER PLANS
|
15
|
|
|
|
|
|
|
ARTICLE 14. LIMITATION ON RIGHTS
|
15
|
|
|
14.1
|
Retention Rights
|
15
|
|
14.2
|
Stockholders’ Rights
|
15
|
|
14.3
|
Regulatory Requirements
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16
|
|
|
|
|
|
ARTICLE 15. WITHHOLDING TAXES; PARACHUTE PAYMENTS
|
16
|
|
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15.1
|
General
|
16
|
|
15.2
|
Section 280G
|
16
|
|
|
|
|
|
ARTICLE 16. FUTURE OF THE PLAN
|
16
|
|
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16.1
|
Term of the Plan
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16
|
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16.2
|
Performance Awards
|
17
|
|
|
|
|
|
ARTICLE 17. CODE SECTION 409A
|
17
|
|
|
|
|
|
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ARTICLE 18. DEFINITIONS
|
17
|
|
|
|
|
|
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ARTICLE 19. EXECUTION
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21
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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
|
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 12. As of March 7, 2018, the aggregate number of Common Shares cumulatively authorized by the Company’s stockholders for issuance as Awards 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 Awards under the Plan. With the March 7, 2018 amendment and restatement of the Plan, the Company’s Board and stockholders 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. Effective as of April 8, 2020, the Company’s Board and stockholders approved an increase of 300,000 in the aggregate number of Common Shares available for Awards under the Plan, to a new total of 3,185,130.
|
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 Awards. 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 VEESTING 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,
|
3.4
|
LIMITATION ON OUTSIDE DIRECTOR COMPENSATION. Notwithstanding anything herein to the contrary, compensation paid to an Outside Director, including cash fees and Awards under the Plan (based on the grant date Fair Market Value of such Awards for financial reporting purposes), shall not exceed $300,000 per fiscal year in respect of his or her service as an Outside Director. For the avoidance of doubt, compensation shall be counted toward this limit for the Board compensation year in which it is earned (and not when it is paid or settled in the event that it is deferred).
|
3.5
|
PER-PARTICIPANT ANNUAL AWARD LIMITS. The Awards granted under the Plan to one Participant in a single fiscal year of the Company may not exceed the following limits: (i) 50,000 Common Shares subject to Options and/or Stock Appreciation Rights in the aggregate, except that Options and/or Stock Appreciation Rights 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 in the aggregate; (ii) 45,000 Common Shares granted in the form of Restricted Shares, Restricted Stock Units, and/or Other Stock-Based Awards in the aggregate, except a new Employee may receive grants of up to 75,000 Restricted Shares, Restricted Stock Units, and/or Other Stock-Based Awards in the aggregate in the fiscal year of the Company in which his or her service with the Company begins; and (iii) no more than $500,000 may be paid in the form of Other Cash-Based Awards to any single Participant per calendar year. The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 12.
|
4.1
|
AWARDS OTHER THAN ISOs. Employees, Outside Directors and Consultants shall be eligible for the grant of Awards other than ISOs.
|
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 an Award 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 Award Agreement shall specify whether the Option is an ISO or an NQO. The provisions of the various Award 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 Award 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 12.
|
5.3
|
EXERCISE PRICE. Each Award 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.
|
5.6
|
OPTION TERM. Unless otherwise specified in an Award 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 Award Agreement. The date for termination of the Option set forth in the Award Agreement;
|
(b)
|
Termination of Service. The ninetieth (90th) 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 applicable Award 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 applicable Award 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.
|
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
|
(a)
|
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:
|
(1)
|
In the case of an ISO granted under the Plan, payment shall be made only pursuant to the express provisions of the applicable Award Agreement. The Award Agreement may specify that payment may be made in any form(s) described in this Section 5.9.
|
(2)
|
In the case of an NQO, the Committee may at any time accept payment in any form(s) described in this Section 5.9.
|
(b)
|
Surrender of Stock. To the extent that this Section 5.9(b) 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.
|
(c)
|
Exercise/Sale. To the extent that this Section 5.9(c) 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.
|
(d)
|
Other Forms of Payment. To the extent that this Section 5.9(d) is applicable, all or any part of the Exercise Price may be paid in any other form that is consistent with applicable laws,
|
6.1
|
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.
|
6.2
|
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
|
6.3
|
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 Award Agreement. An 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.
|
6.4
|
VOTING AND DIVIDEND RIGHTS. Unless otherwise provided in the 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 to the extent that a Restricted Share carries with it a right to receive dividends, 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, an 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).
|
7.1
|
TIME, AMOUNT AND FORM OF AWARDS. Awards under the Plan may be granted in the form of Restricted Stock Units. Restricted Stock Units may be issued either alone or in addition to other Awards granted under the Plan. The Committee shall determine the eligible individuals to whom, and the time or times at which, grants of Restricted Stock Units shall be made; the number of Restricted Stock Units to be awarded; the period of restrictions, if any, applicable to Restricted Stock Units; the performance goals (if any) applicable to Restricted Stock Units; and all other conditions of the Restricted Stock Units. If the restrictions, performance goals and/or conditions established by the Committee are not attained, a Participant shall forfeit his or her Restricted Stock Units in accordance with the terms of the grant. The provisions of Restricted Stock Units need not be the same with respect to each Participant.
|
7.2
|
RESTRICTIONS AND CONDITIONS. Each Award of Restricted Stock Units shall be subject to the following restrictions and conditions and any additional restrictions or conditions as determined by the Committee at the time of grant or, subject to Code Section 409A, thereafter:
|
(a)
|
Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Award Agreement.
|
(b)
|
An 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 Stock Units or thereafter, that all or part of such Restricted Stock Units shall become vested in the event that a Change in Control occurs with respect to the Company.
|
(c)
|
Participants holding Restricted Stock Units shall have no voting rights. A Restricted Stock Unit may, at the Committee’s discretion, carry with it a right to dividend equivalents. Such
|
(d)
|
The rights of Participants granted Restricted Stock Units upon termination of employment or service as an Outside Director or Consultant of the Company or an Affiliate thereof terminates for any reason while the Restricted Stock Units remain outstanding shall be set forth in the Award Agreement.
|
7.3
|
RIGHTS AS A STOCKHOLDER. Except as may otherwise be provided in an Award Agreement with respect to dividend equivalents (in accordance with Section 7.2(c)), a Participant shall have no rights to dividends or any other rights of a stockholder with respect to the Common Shares subject to Restricted Stock Units until the Participant has satisfied all conditions of the Award Agreement and the requirements of Section 15.1 of the Plan, and the Common Shares have been issued to the Participant.
|
7.4
|
SETTLEMENT OF RESTRICTED STOCK UNITS. Settlement of vested Restricted Stock Units shall be made to Participants in the form of Common Shares, unless the Committee, in its sole discretion, provides for the payment of the Restricted Stock Units in cash (or partly in cash and partly in Common Shares) equal to the Fair Market Value of the Common Shares that would otherwise be distributed to the Participant.
|
8.1
|
IN GENERAL. Stock Appreciation Rights may be granted either alone (“Free Standing Rights”) or in conjunction with all or part of any Option granted under the Plan (“Related Rights”). Related Rights may be granted either at or after the time of the grant of such Option. The Committee shall determine the eligible individuals to whom, and the time or times at which, grants of Stock Appreciation Rights shall be made, the number of Common Shares to be awarded, the price per Common Share, and all other conditions of Stock Appreciation Rights. Notwithstanding the foregoing, no Related Right may be granted for more Common Shares than are subject to the Option to which it relates and any Stock Appreciation Right must be granted with an Exercise Price not less than the Fair Market Value of Common Stock on the date of grant. The provisions of Stock Appreciation Rights need not be the same with respect to each Participant. Stock Appreciation Rights granted under the Plan shall be subject to the following terms and conditions set forth in this Section 8.1 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable, as set forth in the applicable Award Agreement.
|
8.2
|
RIGHTS AS STOCKHOLDER. A Participant shall have no rights to dividends or any other rights of a stockholder with respect to the Common Shares subject to a Stock Appreciation Right until the Participant has given written notice of the exercise thereof, has satisfied the requirements of Section 15.1 of the Plan and the Common Shares have been issued to the Participant.
|
(a)
|
Stock Appreciation Rights that are Free Standing Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee in the applicable Award Agreement.
|
(b)
|
Stock Appreciation Rights that are Related Rights shall be exercisable only at such time or times and to the extent that the Options to which they relate shall be exercisable in
|
(c)
|
An 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 Stock Appreciation Rights or thereafter, that all or part of such Stock Appreciation Rights shall become vested in the event that a Change in Control occurs with respect to the Company.
|
(a)
|
Upon the exercise of a Free Standing Right, the Participant shall be entitled to receive up to, but not more than, that number of Common Shares, determined using the Fair Market Value, equal in value to the excess of the Fair Market Value as of the date of exercise over the price per Common Share specified in the Free Standing Right multiplied by the number of Common Shares in respect of which the Free Standing Right is being exercised.
|
(b)
|
A Related Right may be exercised by a Participant by surrendering the applicable portion of the related Option. Upon such exercise and surrender, the Participant shall be entitled to receive up to, but not more than, that number of Common Shares, determined using the Fair Market Value, equal in value to the excess of the Fair Market Value as of the date of exercise over the Exercise Price specified in the related Option multiplied by the number of Common Shares in respect of which the Related Right is being exercised. Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the Related Rights have been so exercised.
|
(c)
|
Notwithstanding the foregoing, the Committee may determine to settle the exercise of a Stock Appreciation Right in cash (or in any combination of Common Shares and cash).
|
(a)
|
In the event of the termination of employment or service with the Company and all Affiliates thereof of a Participant who has been granted one or more Free Standing Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee in the applicable Award Agreement.
|
(b)
|
In the event of the termination of employment or service with the Company and all Affiliates thereof of a Participant who has been granted one or more Related Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as set forth in the related Options.
|
(a)
|
The term of each Free Standing Right shall be fixed by the Committee, but no Free Standing Right shall be exercisable more than ten (10) years after the date such right is granted.
|
(b)
|
The term of each Related Right shall be the term of the Option to which it relates, but no Related Right shall be exercisable more than ten (10) years after the date such right is granted.
|
8.7
|
MODIFICATION OF STOCK APPRECIATION RIGHTS. Notwithstanding anything to the contrary contained herein, at no time will the Committee reprice any Stock Appreciation Right without shareholder approval, including canceling or surrendering and re-granting or exchanging such Stock Appreciation Right for cash or a new award with a lower (or no) exercise price.
|
9.1
|
IN GENEARL. The Committee is authorized to grant Awards to Participants in the form of Other Stock Based Awards or Other Cash-Based Awards, as deemed by the Committee to be consistent with the purposes of the Plan and as evidenced by an Award Agreement. The Committee shall determine the terms and conditions of such Awards, consistent with the terms of the Plan, at the date of grant or thereafter, including any performance goals and performance periods. Common Shares or other securities or property
|
9.2
|
VESTING. An Award Agreement with respect to an Other Stock-Based Award or Other Cash-Based Award 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 an Other Stock-Based Award or Other Cash-Based Award or thereafter, that all or part of such Awards shall become vested in the event that a Change in Control occurs with respect to the Company.
|
10.1
|
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
|
10.2
|
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)
|
operating income or operating profit (including but not limited to operating income and any affiliated growth measure);
|
(2)
|
net earnings or net income (before or after taxes, including but not limited to deferred taxes, and any affiliated growth measure);
|
(3)
|
basic or diluted earnings per share (before or after taxes, including but not limited to deferred taxes, and any affiliated growth measure);
|
(4)
|
revenues (including but not limited to revenue, gross revenue, net revenue, and any affiliated growth measure);
|
(5)
|
gross profit or gross profit growth;
|
(6)
|
return on assets, capital, invested capital, equity or sales;
|
(7)
|
cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital);
|
(8)
|
earnings before or after taxes, interest, depreciation and/or amortization (including but not limited to changes in this measure);
|
(9)
|
improvements or changes in capital structure (including but not limited to debt balances or debt issuance);
|
(10)
|
budget management;
|
(11)
|
productivity targets;
|
(12)
|
economic value added or other value added measurements;
|
(13)
|
share price (including, but not limited to, growth measures and total shareholder return);
|
(14)
|
expense targets;
|
(15)
|
margins (including but not limited to gross or operating margins);
|
(16)
|
efficiency measurements (including but not limited to availability measurements, call wait times, call, meeting, shipping or other volume measurements, turnaround times and error rates);
|
(17)
|
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);
|
(18)
|
equity or market value measures;
|
(19)
|
enterprise or adjusted market value measures;
|
(20)
|
safety record;
|
(21)
|
completion of business acquisition, divestment or expansion;
|
(22)
|
book value or changes in book value (including but not limited to tangible book value and net asset measures);
|
(23)
|
assets or changes in assets;
|
(24)
|
cash position or changes in cash position;
|
(25)
|
employee retention or recruiting measures;
|
(26)
|
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);
|
(27)
|
changes in location or the opening or closing of facilities;
|
(28)
|
contract or other development of relationship with identified suppliers, distributors or other business partners; and
|
(29)
|
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).
|
12.1
|
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 Common Shares available for issuance pursuant to future Awards under Article 3, (b) the limitations set forth in Section 3.5, (c) the number of Common Shares covered by each outstanding Option and Stock Appreciation Right or (d) the Exercise Price under each outstanding Option and Stock Appreciation Right. Except as provided in this Article 12, 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.
|
12.2
|
DISSOLUTION OR LIQUIDATION. To the extent not previously exercised, Options shall terminate immediately prior to the dissolution or liquidation of the Company.
|
12.3
|
REORGANIZATIONS. In the event that the Company is a party to a merger or other reorganization, outstanding Awards 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.
|
14.3
|
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.
|
15.1
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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.
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15.2
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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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16.2
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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 Article 10 will qualify as performance-based compensation for purposes of Code Section 162(m).
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18.1
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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.
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18.2
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Award means any award of an Option, Restricted Share, Restricted Stock Unit, Stock Appreciation Right, Other Stock-Based Award or Other Cash-Based Award under the Plan.
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18.3
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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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18.5
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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
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(a)
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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;
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(b)
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The consummation of a sale, transfer or other disposition of all or substantially all of the Company’s assets;
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(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
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(d)
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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.
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18.11
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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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18.12
|
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
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18.15
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Exercise Price means, with respect to any Award under which the holder may purchase Common Shares, the price per Common Share at which a holder of such Award granted hereunder may purchase Common Shares issuable upon exercise of such Award, as specified in the applicable Award Agreement.
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18.16
|
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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18.19
|
Option means an ISO or NQO granted under the Plan and entitling the holder to purchase Common Shares.
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18.20
|
Other Cash-Based Award means a cash Award granted to a Participant under Article 9 of the Plan, including cash awarded as a bonus or upon the attainment of performance goals or otherwise as permitted under the Plan.
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18.21
|
Other Stock-Based Award means a right or other interest granted to a Participant under Article 9 of the Plan that may be denominated or payable and valued in whole or in part by reference to, or otherwise based on or related to, Common Shares, including, but not limited to, unrestricted Common Shares or dividend equivalents, each of which may be subject to the attainment of performance goals or a period of continued employment or other terms or conditions as permitted under the Plan.
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18.23
|
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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18.26
|
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.
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18.27
|
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
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18.28
|
Restricted Stock Unit means a notional account established pursuant to an Award granted to a Participant, as described in Article 7 of the Plan, that is (i) valued solely by reference to Common Shares, (ii) subject to restrictions specified in the Award Agreement, and (iii) payable in cash or in
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18.29
|
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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18.30
|
Stock Appreciation Right means the right pursuant to an Award granted under Article 8 of the Plan to receive an amount equal to the excess, if any, of (i) the aggregate Fair Market Value, as of the date such Award or portion thereof is surrendered, of the Common Shares covered by such Award or such portion thereof, over (ii) the aggregate Exercise Price of such Award or such portion thereof.
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18.31
|
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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18.32
|
Subject Participant means a Participant who is designated by the Board as an “executive officer” under the Exchange Act.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Heska Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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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
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Dated: May 8, 2020
|
/s/ Kevin S. Wilson
|
|
KEVIN S. WILSON
|
|
Chief Executive Officer and President
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Heska Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Dated: May 8, 2020
|
/s/ Catherine Grassman
|
|
CATHERINE GRASSMAN
|
|
Executive Vice President, Chief Financial Officer
|
|
(Principal Financial Officer)
|
Dated: May 8, 2020
|
By:
|
/s/ Kevin S. Wilson
|
|
Name:
|
KEVIN S. WILSON
|
|
Title:
|
Chief Executive Officer and President
|
Dated: May 8, 2020
|
By:
|
/s/ Catherine Grassman
|
|
Name:
|
CATHERINE GRASSMAN
|
|
Title:
|
Executive Vice President, Chief Financial Officer
|