Heska
Annual Report 2016

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KHESKA CORP - HSKAFiled: March 06, 2017 (period: December 31, 2016)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results.UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2016ORoTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the transition period from _________________ to _______________________Commission file number: 0-22427HESKA CORPORATION(Exact name of registrant as specified in its charter)Delaware77-0192527(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification Number)3760 Rocky Mountain AvenueLoveland, Colorado80538(Address of principal executive offices)(Zip Code)Registrant's telephone number, including area code: (970) 493-7272Securities registered pursuant to Section 12(b) of the Act:Public Common Stock, $.01 par value(Title of Class) Securities registered pursuant to Section 12(g) of the Act: NoneThe Nasdaq Stock Market LLC(Name of Each Exchange on Which Registered)Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.Yes o No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post suchfiles). Yes x No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant'sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of"large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.Large accelerated filer oAccelerated filer xNon-accelerated filer o (Do not check if a small reporting company)Smaller Reporting Company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No xThe aggregate market value of voting common stock held by non-affiliates of the Registrant was approximately $228,685,202 as of June 30, 2016 based upon the closing priceon the Nasdaq Capital Market reported for such date. This calculation does not reflect a determination that certain persons are affiliates of the Registrant for any other purpose.7,052,880 shares of the Registrant's Public Common Stock, $.01 par value, were outstanding at March 2, 2017.___________________________________DOCUMENTS INCORPORATED BY REFERENCEItems 10, 11, 12, 13 and 14 of Part III incorporate by reference information from the Registrant's definitive proxy statement to be filed with the Securities and ExchangeCommission in connection with the solicitation of proxies for the Registrant's 2017 Annual Meeting of Stockholders.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.TABLE OF CONTENTS PagePART I 1 Item 1.Business1 Item 1A.Risk Factors12 Item 1B.Unresolved Staff Comments26 Item 2.Properties26 Item 3.Legal Proceedings26 Item 4.Mine Safety Disclosures27PART II 28 Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase ofEquity Securities28 Item 6.Selected Financial Data30 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31 Item 7A.Quantitative and Qualitative Disclosures about Market Risk42 Item 8.Financial Statements and Supplementary Data43 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure74 Item 9A.Controls and Procedures74 Item 9B.Other Information75PART III 75 Item 10.Directors, Executive Officers and Corporate Governance75 Item 11.Executive Compensation76 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters76 Item 13.Certain Relationships and Related Transactions, and Director Independence76 Item 14.Principal Accountant Fees and Services76PART IV 77 Item 15.Exhibits and Financial Statement Schedules77 Item 16.Form 10-K Summary83 Signatures 84 Exhibit Index85 HESKA, ALLERCEPT, HEMATRUE, SOLO STEP, THYROMED, VET/OX and VITALPATH are registered trademarks ofHeska Corporation. TRI-HEART is a registered trademark of Intervet Inc., d/b/a Merck Animal Health, formerly known as Schering-Plough Animal Health Corporation ("Merck Animal Health"), which is a unit of Merck & Co., Inc., in the United States and is aregistered trademark of Heska Corporation in other countries. DRI-CHEM is a registered trademark of FUJIFILM Corporation. Thisannual report on Form 10-K also refers to trademarks and trade names of other organizations.-i-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Statement Regarding Forward Looking StatementsThis Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, asamended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For this purpose, any statementscontained herein that are not statements of current or historical fact may be deemed to be forward-looking statements. Without limitingthe foregoing, words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," variations of such words andsimilar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performanceand are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results could differmaterially from those expressed or forecasted in any such forward-looking statements as a result of certain factors, including those setforth in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" andelsewhere in this Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements.Although we believe that expectations reflected in the forward-looking statements are reasonable, we cannot guarantee futureresults, levels of activity, performance or achievements. We expressly disclaim any obligation or undertaking to release publicly anyupdates or revisions to any forward-looking statements contained herein to reflect the passage of time, any change in our expectationswith regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as otherwiserequired by applicable securities laws. These forward-looking statements apply only as of the date of this Form 10-K or for statementsincorporated by reference from our 2017 proxy statement on Schedule 14A, as of the date of the Schedule 14A.PART IItem 1.Business.Unless we state otherwise or the context otherwise requires, the terms "Heska," "we," "our," "us" and the "Company" refer toHeska Corporation and its consolidated subsidiaries.OverviewWe sell advanced veterinary diagnostic and specialty products. Our offerings include blood testing instruments and supplies,digital imaging products, software and services, vaccines, local and cloud-based data services, allergy testing and immunotherapy, andsingle-use offerings such as in-clinic diagnostic tests and heartworm preventive products. Our core focus is on the canine and felinehealthcare space.On February 24, 2013, we acquired a 54.6% interest in Cuattro Veterinary USA, LLC (the "Acquisition"), which wassubsequently renamed Heska Imaging US, LLC ("US Imaging") and marked our entry into the veterinary imaging market in the UnitedStates.On May 31, 2016, we acquired Cuattro Veterinary, LLC ("Cuattro International"), which was subsequently renamed HeskaImaging International, LLC ("International Imaging") and marked our entry into the international veterinary imaging market. Financialinformation broken out by geographic region is incorporated by reference to Note 13 to the financial statements included under Item 8of this annual report on Form 10-K.We were founded as Paravax, Inc. and incorporated in California in 1988. We changed our name to Heska Corporation in 1995,reincorporated in Delaware and completed our initial public offering in 1997.-1-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Our principal executive offices are located at 3760 Rocky Mountain Avenue, Loveland, Colorado 80538, our telephone numberis (970) 493-7272 and our internet address is www.heska.com.Products and ServicesOur business is composed of two reportable segments, Core Companion Animal Health ("CCA") and Other Vaccines,Pharmaceuticals and Products ("OVP"). The CCA segment includes, primarily for canine and feline use, blood testing instruments andsupplies, digital imaging products, software and services, local and cloud-based data services, allergy testing and immunotherapy, andsingle use offerings such as in-clinic diagnostic tests and heartworm preventive products. The OVP segment includes private labelvaccine and pharmaceutical production, primarily for cattle but also for other species including equine, porcine, avian, feline andcanine. All OVP products are sold by third parties under third party labels.Core Companion Animal Health SegmentWe presently sell a variety of companion animal health products and services, among the most significant of which are thefollowing:Veterinary Blood Testing and Other Non-Imaging InstrumentsWe offer a line of veterinary blood testing and other instruments, some of which are described below. We also market and sellconsumable supplies for these instruments. Our line of veterinary instruments includes the following:•Blood Chemistry. The Element DC® Veterinary Chemistry Analyzer (the "Element DC") is an easy-to-use, robust system thatuses dry slide technology for blood chemistry and electrolyte analysis and has the ability to run 22 tests at a time with asingle blood sample. Test slides are available as both pre-packaged panels as well as individual slides. The DRI-CHEM7000 Veterinary Chemistry Analyzer (the "DRI-CHEM 7000") is a complementary chemistry offering, co-branded withFUJIFILM Corporation ("FUJIFILM"), with higher throughput, multiple patient staging and a "STAT" feature whichprovides emergency sample flexibility in critical cases. The Element DC and DRI-CHEM 7000 utilize the same test slides.We are supplied with the Element DC, the DRI-CHEM 7000 and affiliated test slides and supplies under a contractualagreement with FUJIFILM.•Hematology. The Element HT5® Hematology Analyzer (the "HT5") is a true 5-part hematology analyzer which uses laser,impedance and colorimetric technologies to measure key parameters such as white blood cell count, red blood cell count,platelet count and hemoglobin levels in animals. The HT5, which we began shipping in January 2015, can generate resultsin less than a minute with 15 µL of sample. We are supplied with the HT5 and affiliated reagents and supplies under acontractual agreement with Shenzen Mindray Bio-Medical Electronics Co., Ltd. ("Mindray"). The HEMATRUE VeterinaryHematology Analyzer (the "HEMATRUE") is an easy-to-use and reliable 3-part hematology blood analyzer that we continueto offer to our customers. We are supplied HEMATRUE instruments and affiliated reagents and supplies for theHEMATRUE under a contractual agreement with Boule Medical AB ("Boule").•Blood Gases and Electrolytes. The Element POC® Blood Gas & Electrolyte Analyzer ("EPOC") is a handheld, wirelessanalyzer which delivers rapid blood gas, electrolyte, metabolite, and basic blood chemistry testing. EPOC features test cardswith room temperature storage which can offer results with less than 100 µL of sample as well as WiFi and Bluetoothconnectivity. We began to ship EPOC units to customers in October 2013. EPOC and affiliated consumables and supplies-2-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.are supplied to us under a contractual agreement with Alere North America, LLC, a unit of Alere Inc.•Immunodiagnostics. The Element i Immunodiagnostic Analyzer ("Element i") utilizes fluorescence immunoassay technologyto ensure sensitivity for accurate in-clinic detection of Total T4, TSH and Cortisol. The Element i is a benchtop technologywith a test time of 10 minutes or less per analyte. Along with confidence in results, this measurement principle allows forsimplified reagents and testing protocols. Element i units, which we began shipping in December 2015, are supplied to usunder a contractual agreement with FUJIFILM.•IV Pumps. The VET/IV 2.2 infusion pump is a compact, affordable IV pump that allows veterinarians to easily provideregulated infusion of fluids for their patients.Veterinary Imaging Instruments and ServicesWe offer a line of veterinary imaging instruments and services, including:Digital Radiography Solutions. Our digital radiography solutions are marketed and sold under the "Cuattro" brand name. Wesell hardware including digital radiography detectors, acquisition workstation equipment, positioning aides such as tunnels and tables,viewing computers and other accessories along with embedded software and support, data hosting and other services. CloudDRTMsolutions combine flat panel digital radiography acquisition with web-based image storage. CloudbankTM is an automatic, secure, web-based image storage solution designed to interface with the software we sell. ViewCloudTM is a PACS (Picture Archival andCommunications System) for Cloudbank for web or local viewing, reporting, planning and email sharing of studies on internet devices,including personal computers, tablet devices and smartphones. SupportCloudTM is a support package including call center voice andremote diagnostics, recovery and other services, such as the provision of warranty-related loaner units, to support CloudDR, Cloudbankand ViewCloud.We also sell mobile digital radiography products, primarily for equine use. The Uno 6TM is a full powered, seamlesslyintegrated, portable digital radiography generator with an embedded touchscreen digital radiography acquisition computer based upon apatented design of Cuattro, LLC. The Slate 6TM is a mobile digital radiography acquisition console with a direct sunlight readabledisplay, including multi-touch software. Slate 6 and Uno 6 have the ability to link to Digital Imaging and Communication in Medicine(DICOM) servers of all types as well as Cloudbank.Cuattro, LLC provides us with the hardware, software and support, data hosting and other services for our digital radiographysolutions under exclusive contractual arrangements in the United States and shares held by our President and Chief Executive Officer,Kevin S. Wilson, his spouse, Shawna M. Wilson ("Mrs. Wilson") and by trusts for the benefit of their children and family, comprise100% ownership of Cuattro, LLC.Ultrasound Systems. Our ultrasound products, including affiliated probes and peripherals, are provided to us under an exclusiveagreement with Esaote USA ("Esaote"). We sell several different ultrasound products with varying features and corresponding pricepoints, all under Esaote's trade names or logos. These offerings include the MyLab family of high performance systems and probes, foruse in abdominal, cardiac and small parts applications in companion animal and equine patients as well as other species. The ultrasoundproducts we sell generally seamlessly integrate with our Cloudbank and ViewCloud offerings for image storing and viewing.-3-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Point-of-Care Heartworm Diagnostic TestsHeartworm infections of dogs and cats are caused by the parasite Dirofilaria immitis. This parasitic worm is transmitted in larvalform to dogs and cats through the bite of an infected mosquito. Larvae develop into adult worms that live in the pulmonary arteries andheart of the host, where they can cause serious cardiovascular, pulmonary, liver and kidney disease. Our canine and feline heartwormdiagnostic tests use monoclonal antibodies or a recombinant heartworm antigen, respectively, to detect heartworm antigens orantibodies circulating in the blood of an infected animal.We currently market and sell heartworm diagnostic tests for both dogs and cats. SOLO STEP CH for dogs and SOLO STEP FHfor cats are available in point-of-care, single use formats that can be used by veterinarians on site. We also offer SOLO STEP CH BatchTest Strips, a rapid and simple point-of-care antigen detection test for dogs that allows veterinarians in larger practices to run multiplesamples at the same time. We obtain SOLO STEP CH, SOLO STEP FH and SOLO STEP Batch Test Strips under a contractualagreement with Quidel Corporation ("Quidel").Heartworm Preventive ProductsWe have an agreement with Merck Animal Health, a unit of Merck & Co., Inc., granting Merck Animal Health the exclusivedistribution and marketing rights for our canine heartworm prevention product, TRI-HEART Plus Chewable Tablets, ultimately sold toor through veterinarians in the United States and Canada. TRI-HEART Plus Chewable Tablets (ivermectin/pyrantel) are indicated foruse as a monthly preventive treatment of canine heartworm infection and for treatment and control of ascarid and hookworm infections.We manufacture TRI-HEART Plus Chewable Tablets at our Des Moines, Iowa production facility.Allergy Products and ServicesAllergy is common in companion animals, and it has been estimated to affect approximately 10% to 15% of dogs. Clinicalsymptoms of allergy are variable, but are often manifested as persistent and serious skin disease in dogs and cats. Clinical managementof allergic disease is problematic, as there are a large number of allergens that may give rise to these conditions. Although skin testing isoften regarded as the most accurate diagnostic procedure, such tests can be painful, subjective and inconvenient. The effectiveness ofthe immunotherapy that is prescribed to treat allergic disease is inherently limited by inaccuracies in the diagnostic process.We believe that our ALLERCEPT Definitive Allergen Panels provide the most accurate determination of which we are aware ofthe specific allergens to which an animal, such as a dog, cat or horse, is reacting. The panels use a highly specific recombinant versionof the natural IgE receptor to test the serum of potentially allergic animals for IgE directed against a panel of known allergens. A typicaltest panel consists primarily of various pollen, grass, mold, insect and mite allergens. The test results serve as the basis for prescriptionALLERCEPT Therapy Shots and ALLERCEPT Therapy Drops. We operate veterinary laboratories in Loveland, Colorado and Fribourg,Switzerland which both offer blood testing using our ALLERCEPT Definitive Allergen Panels.We sell kits to conduct blood testing using our ALLERCEPT Definitive Allergen Panels to third-party veterinary diagnosticlaboratories outside of the United States. We also sell products to screen for the presence of allergen-specific IgE to these customers -we sell kits to conduct preliminary blood testing using products based on our ALLERCEPT Definitive Allergen Panels as well as asimilar test requiring less technical sophistication, our E-SCREEN Test. Animals testing positive for allergen-specific IgE using thesescreening tests are candidates for further evaluation using our ALLERCEPT Definitive Allergen Panels.-4-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Veterinarians who use our ALLERCEPT Definitive Allergen Panels often purchase our ALLERCEPT Therapy Shots orALLERCEPT Therapy Drops for those animals with positive test results. These prescription immunotherapy treatment sets areformulated specifically for each allergic animal and contain only the allergens to which the animal has significant levels of IgEantibodies. The prescription formulations are administered in a series of subcutaneous injections (Shots) or by daily sublingual (underthe tongue) administration (Drops), with doses increasing over several months, to ameliorate the allergic condition of the animal.Immunotherapy is generally continued for an extended time. We offer canine, feline and equine subcutaneous and sublingualimmunotherapy treatment products. We believe our ALLERCEPT Therapy Drops offer a convenient alternative to subcutaneousinjection, thereby increasing the likelihood of pet owner compliance.Other Vaccines, Pharmaceuticals and Products SegmentWe developed a line of bovine vaccines that are licensed by the United States Department of Agriculture ("USDA").Historically, the largest distributor of these vaccines was Agri Laboratories, Ltd. ("AgriLabs"), who sold these vaccines primarily underthe Titanium® and MasterGuard® brands. In November 2013, AgriLabs assigned the long-term agreement with us related to thesevaccines to, and the agreement was assumed by, Eli Lilly and Company ("Eli Lilly") acting through Elanco. In January 2015, we signeda long-term Master Supply Agreement related to these vaccines with Eli Lilly acting through Elanco, thereby terminating the AgriLabsagreement previously assumed by Eli Lilly in November 2013.We manufacture biological and pharmaceutical products for a number of other animal health companies. We manufactureproducts for animals other than cattle including horses, pigs, chickens, cats and dogs. Our offerings range from providing completeturnkey services which include research, licensing, production, labeling and packaging of products to providing any one of theseservices as needed by our customers as well as validation support and distribution services.Marketing, Sales and Customer SupportWe estimate that there are approximately 53,000 veterinarians in the United States whose practices are devoted principally tosmall animal medicine and these veterinarians practice in approximately 24,000 clinics in the United States. Veterinarians may obtainour products directly from us or indirectly through others. All our Core Companion Animal Health products ultimately are soldprimarily to or through veterinarians. In many cases, veterinarians will markup their costs to the end user. The acceptance of ourproducts by veterinarians is critical to our success.We currently market our Core Companion Animal Health products in the United States to veterinarians through an outside fieldorganization, a telephone sales force, independent third-party distributors, as well as through trade shows and print advertising andthrough other distribution relationships, such as Merck Animal Health in the case of our heartworm preventive. As of December 31,2016, our outside field organization consisted of 36 individuals in various parts of the United States and our inside sales force consistedof 16 individuals.We have a staff dedicated to customer and product support in our Core Companion Animal Health segment includingveterinarians, technical support specialists and service technicians. Individuals from our product development group may also be usedas a resource in responding to certain product inquiries.Internationally, we market our Core Companion Animal Health products to veterinarians primarily through third-partyveterinary diagnostic laboratories and independent third-party distributors.All OVP products are marketed and sold by third parties under third-party labels.-5-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.We grant third parties rights to our intellectual property as well as our products, with our compensation often taking the form ofroyalties and/or milestone payments.ManufacturingThe majority of our revenue is from proprietary products manufactured by third parties. Third parties manufacture ourveterinary instruments, including affiliated consumables and supplies, as well as other products including key components of ourheartworm point-of-care diagnostic tests. Our chemistry and immunodiagnostic instruments and affiliated supplies are manufacturedunder contracts with FUJIFILM. Our hematology instruments and affiliated supplies are manufactured under contracts with Mindrayand Boule. Our blood gas and electrolyte analyzers and affiliated supplies are supplied under a contract with Alere North America,LLC. Our digital radiography products are supplied under a contract with Cuattro, LLC, which typically buys its hardware products andcomponents from third parties. Our ultrasound products are supplied under a contract with Esaote USA. Key components of ourheartworm point-of-care diagnostic tests are manufactured under a contract with Quidel. We manufacture and supply Quidel withcertain critical raw materials and perform the final packaging operations for these products.Our facility in Des Moines, Iowa is a USDA, Food and Drug Administration ("FDA"), and Drug Enforcement Agency ("DEA")licensed biological and pharmaceutical manufacturing facility. This facility currently has the capacity to manufacture more than 50million doses of vaccine each year. We expect that we will, for the foreseeable future, manufacture most or all of our pharmaceuticaland biological products at this facility, as well as most or all of our recombinant proteins and other proprietary reagents for ourdiagnostic tests. We currently manufacture our canine heartworm prevention product, our allergy treatment products and all our OVPsegment products at this facility. Our OVP segment's customers purchase products in both finished and bulk format, and we perform allphases of manufacturing, including growth of the active bacterial and viral agents, sterile filling, lyophilization and packaging at thisfacility. We manufacture our various allergy products at our Des Moines facility, our Loveland facility and our Fribourg facility. Webelieve the raw materials for products we manufacture are available from more than one source.Product DevelopmentWe are committed to providing innovative products to address health needs of companion animals. We may obtain suchproducts from external sources, external collaboration or internal research and development.We are committed to identifying external product opportunities and creating business and technical collaborations that lead tohigh value veterinary products. We believe that our active participation in scientific networks and our reputation for investing inresearch enhances our ability to acquire external product opportunities. We have collaborated, and intend to continue to do so, with anumber of companies and universities. Examples of such collaborations include:•Quidel for the development of SOLO STEP CH Cassettes, SOLO STEP CH Batch Test Strips and SOLO STEP FHCassettes;•Mindray for the development of veterinary applications for the ELEMENT HT5 Veterinary Hematology Analyzer andassociated reagents; and•FUJIFILM for the development of veterinary applications for the Element DC Veterinary Chemistry Analyzer andassociated slides and supplies.-6-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Internal research and development is managed on a case-by-case basis. We employ individuals with expertise in variousapplicable areas and will form multidisciplinary product-associated teams as appropriate. We incurred expenses of $2.1 million, $1.7million and $1.4 million in the years ended December 31, 2016, 2015 and 2014, respectively, in support of our research anddevelopment activities.Intellectual PropertyWe believe that patents, trademarks, copyrights and other proprietary rights represent opportunities to grow our business andmaintain or enhance our competitive position. We also rely upon trade secrets, know-how, continuing technological innovations andlicensing opportunities to develop and maintain our competitive position. The proprietary technologies of our OVP segment areprimarily protected through trade secret protection of, for example, our manufacturing processes in this area.We actively seek patent protection both in the United States and abroad. Our issued patent portfolios primarily relate toheartworm control, flea control, allergy, infectious disease vaccines, diagnostic and detection tests, immunomodulators,instrumentation, nutrition, pain control and vaccine delivery technologies. As of December 31, 2016, we owned, co-owned or hadrights to 103 issued U.S. patents expiring at various dates from January 2017 to May 2028 and had no pending U.S. patent applications.Our corresponding foreign patent portfolio as of December 31, 2016 included 80 issued patents in various foreign countries expiring atvarious dates from March 2017 to August 2024 and had no pending applications.We also have obtained exclusive and non-exclusive licenses for numerous other patents held by academic institutions and forprofit companies.SeasonalityOur fourth quarter results in any given year are typically stronger than those for any other quarter. We expect this trend tocontinue in the future as it is a historical trend within our digital imaging business.Government RegulationAlthough the majority of our revenue is from the sale of unregulated items, many of our products or products that we maydevelop are, or may be, subject to extensive regulation by governmental authorities in the United States, including the USDA and theFDA, and by similar agencies in other countries. These regulations govern, among other things, the development, testing,manufacturing, labeling, storage, pre-market approval, advertising, promotion, sale and distribution of our products. Satisfaction ofthese requirements can take several years to achieve and the time needed to satisfy them may vary substantially, based on the type,complexity and novelty of the product. Any product that we develop must receive all relevant regulatory approval or clearances, ifrequired, before it may be marketed in a particular country. The following summarizes the major U.S. government agencies thatregulate animal health products:•USDA. Vaccines and certain single use, point-of-care diagnostics are considered veterinary biologics and are thereforeregulated by the Center for Veterinary Biologics, or CVB, of the USDA. Industry data indicates that it takesapproximately four years and in excess of $1.0 million to license a conventional vaccine for animals from basic researchthrough licensing. In contrast to vaccines, single use, point-of-care diagnostics can typically be licensed by the USDAin about two years, at considerably less cost. However, vaccines or diagnostics that use innovative materials, such asthose resulting from recombinant DNA technology, usually require additional time to license. The USDA licensingprocess involves the submission of several data packages. These packages include information on how the product willbe manufactured, information on the efficacy and safety of the product in-7-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.laboratory and target animal studies and information on performance of the product in field conditions.•FDA. Pharmaceutical products, which typically include synthetic compounds, are approved and monitored by theCenter for Veterinary Medicine of the FDA. Under the Federal Food, Drug and Cosmetic Act, the same statutorystandard for FDA approval applies to both human and animal drugs: demonstrated safety, efficacy and compliance withFDA manufacturing standards. However, unlike human drugs, neither preclinical studies nor a sequential phase systemof studies are required. Rather, for animal drugs, studies for safety and efficacy may be conducted immediately in thespecies for which the drug is intended. Thus, there is no required phased evaluation of drug performance, and theCenter for Veterinary Medicine will review data at appropriate times in the drug development process. The process canbe costly and time consuming, requiring up to $100 million and seven to ten years to sell an animal drug in themarket. In addition, the time and cost for developing companion animal drugs may be significantly less than for drugsfor livestock animals, which generally have enhanced standards designed to ensure safety in the food chain.•EPA. Products that are applied topically to animals or to premises to control external parasites are regulated by theEnvironmental Protection Agency, or EPA.After we have received regulatory licensing or approval for our products, numerous regulatory requirements typically apply.Among the conditions for certain regulatory approvals is the requirement that our manufacturing facilities or those of our third-partymanufacturers conform to current Good Manufacturing Practices or other manufacturing regulations, which include requirementsrelating to quality control and quality assurance as well as maintenance of records and documentation. The USDA, FDA and foreignregulatory authorities strictly enforce manufacturing regulatory requirements through periodic inspections and/or reports.A number of our animal health products are not regulated. For example, certain products such as our ALLERCEPT panels arenot regulated by either the USDA or FDA. Similarly, none of our veterinary instruments requires regulatory approval to be marketedand sold in the United States.We have pursued regulatory approval outside the United States based on market demographics of foreign countries. Formarketing outside the United States, we are subject to foreign regulatory requirements governing regulatory licensing and approval formany of our products. Licensing and approval by comparable regulatory authorities of foreign countries must be obtained before wecan market products in those countries. Product licensing approval processes and requirements vary from country to country and thetime required for such approvals may differ substantially from that required in the United States. We cannot be certain that approval ofany of our products in one country will result in approvals in any other country.To date, we or our distributors have sought regulatory approval for certain of our products in Canada, which is governed by theCanadian Center for Veterinary Biologics, or CCVB; in Japan, which is governed by the Japanese Ministry of Agriculture, Forestry andFisheries, or MAFF; in Australia, which is governed by the Australian Department of Agriculture, Fisheries and Forestry, or ADAFF; inSouth Africa, which is governed by the Republic of South Africa Department of Agriculture, or RSADA; and in certain other countriesrequiring such approval.Core Companion Animal Health products previously discussed which have received regulatory approval in the United Statesand/or elsewhere are summarized below:-8-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ProductsCountryRegulatedAgencyStatusALLERCEPT Allergy Treatment SetsUnited StatesCanadaYesYesUSDACCVBLicensedLicensedSOLO STEP CHUnited StatesEUCanadaJapanAustraliaYesNo-in most countriesYesYesYesUSDA CCVBMAFFADAFFLicensed LicensedLicensedLicensedSOLO STEP CH Batch Test StripsUnited StatesCanadaYesYesUSDACCVBLicensedLicensedSOLO STEP FHUnited StatesCanadaAustraliaYesYesYesUSDACCVBADAFFLicensedLicensedLicensedTRI-HEART Plus Heartworm PreventiveUnited StatesJapanSouth KoreaYesYesYesFDAMAFFNVRQSLicensedLicensedLicensedCompetitionOur market is intensely competitive. Our competitors include independent animal health companies and major pharmaceuticalcompanies that have animal health divisions. We also compete with independent, third-party distributors, including distributors who sellproducts under their own private labels. In the point-of-care diagnostic testing market, our major competitors include IDEXXLaboratories, Inc. ("IDEXX"), Abaxis, Inc. ("Abaxis") and Zoetis Inc. ("Zoetis"). The products manufactured by our OVP segment forsale by third parties compete with similar products offered by a number of other companies, some of which have substantially greaterfinancial, technical, research and other resources than us and may have more established marketing, sales, distribution and serviceorganizations than our OVP segment's customers. Companies with a significant presence in the animal health market such as Bayer AG,CEVA Santé Animale, Eli Lilly, Merck, Sanofi, Vétoquinol S.A., Virbac S.A. and Zoetis may be marketing or developing products thatcompete with our products or would compete with them if successfully developed. These and other competitors and potentialcompetitors may have substantially greater financial, technical, research and other resources and larger, more established marketing,sales, distribution and service organizations than we do. Our competitors may offer broader product lines and have greater namerecognition than we do.Environmental RegulationIn connection with our product development activities and manufacturing of our biological, pharmaceutical and diagnostic anddetection products, we are subject to federal, state and local laws, rules, regulations and policies governing the use, generation,manufacture, storage, handling and disposal of certain materials, biological specimens and wastes. Although we believe that we havecomplied with these laws, regulations and policies in all material respects and have not been required to take any significant action tocorrect any noncompliance, we may be required to incur significant costs to comply with environmental and health and safetyregulations in the future. Although we believe that our safety procedures for handling and disposing of such materials comply with thestandards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot beeliminated. In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed ourresources.EmployeesAs of December 31, 2016, we and our subsidiaries employed 327 people, of whom 140 were focused in production andtechnical and logistical services, including instrumentation service, 125 in sales, marketing and customer support, 58 in general andadministrative services, such as finance, and 4 in product development. We believe that our ability to attract and retain skilled personnelis critical to our success.-9-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.None of our employees are covered by a collective bargaining agreement, and we believe our employee relations are good.Where You Can Find Additional InformationOur principal executive offices are located 3760 Rocky Mountain Avenue, Loveland, Colorado 80538, our telephone number is970-493-7272, and our Internet address is www.heska.com. Reference to our website in this Annual Report on Form 10-K are inactivetextual references only and the content of our website should not be deemed incorporated by reference for any purpose.Because we believe it provides useful information in a cost-effective manner to interested investors, we make available free ofcharge, via a link on our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, andamendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicalafter we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the "SEC").In addition, you may review a copy of this annual report on Form 10-K, including exhibits and any schedule filed therewith,and obtain copies of such materials at prescribed rates, at the Securities and Exchange Commission's Public Reference Room in Room1580, 100 F Street, NE, Washington, D.C. 20549-0102. You may obtain information on the operation of the Public Reference Room bycalling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a website(http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, such as HeskaCorporation, that file electronically with the Securities and Exchange Commission.Executive Officers of the RegistrantOur executive officers and their ages as of March 2, 2017 are as follows: NameAgePositionKevin S. Wilson44Chief Executive Officer and PresidentJohn McMahon51Vice President, Chief Financial OfficerJason A. Napolitano48Chief Operating Officer, Chief Strategist and SecretaryMichael J. McGinley, Ph.D.56President, Biologicals & PharmaceuticalsNancy Wisnewski, Ph.D.54Executive Vice President, Diagnostic Operations and Product DevelopmentSteven M. Eyl51Executive Vice President, Global Sales and MarketingSteven M. Asakowicz51Executive Vice President, Companion Animal Health SalesRodney A. Lippincott43Executive Vice President, Companion Animal Health SalesKevin S. Wilson was appointed President and Chief Executive Officer effective March 31, 2014. He previously served as ourPresident and Chief Operating Officer from February 2013. Mr. Wilson became a member of our Board of Directors in May 2014.Mr. Wilson is a founder, member and officer of Cuattro, LLC. Since 2008, he has been involved in developing technologies forradiographic imaging with Cuattro, LLC and as a founder of Cuattro Software, LLC, Cuattro Medical, LLC and Cuattro Veterinary,LLC. Mr. Wilson served on the board of various private, non-profit, and educational organizations from 2005 to 2011. He was afounder of Sound Technologies, Inc., a diagnostic imaging company, in 1996. After Sound Technologies, Inc. was sold to VCAAntech, Inc. in 2004, Mr. Wilson served as Chief Strategy Officer for VCA Antech, Inc. until 2006. Mr. Wilson attended SaddlebackCollege. -10-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.John McMahon, CPA, was appointed Vice President and Chief Financial Officer in September 2016 and designated theCompany's principal accounting officer in November 2015. He previously served as Vice President, Financial Operations andController from October 2015 to September 2016. From March 2014 to May 2015 he was employed by Pinnacle Ag Holdings, LLC asVice President, Corporate Controller. Mr. McMahon previously worked as Vice President, Corporate Controller for Advanced EnergyIndustries from 2008 to 2014 and for Danka Office Imaging from June 2005 to June 2008 as Senior Vice President, CorporateController. Mr. McMahon holds an MBA in Finance from California State University, East Bay and a BS in Communications fromKutztown University.Jason A. Napolitano was appointed Chief Strategist in September 2016 and Chief Operating Officer in October 2015. Hepreviously served as Executive Vice President and Chief Financial Officer from May 2002 to September 2016. He was appointed ourSecretary in February 2009, having previously served as our Secretary from May 2002 to December 2006. Prior to joining us formally,he was a financial consultant. From 1990 to 2001, Mr. Napolitano held various positions at Credit Suisse First Boston, an investmentbank, including Vice President in health care investment banking and Director in mergers and acquisitions. He holds a BS degree fromYale University.Michael J. McGinley, Ph.D. was appointed President, Biologicals & Pharmaceuticals in February 2013. He previously served asPresident and Chief Operating Officer from January 2009 to February 2013, Vice President, Global Operations from April throughDecember 2008, Vice President, Operations and Technical Affairs and General Manager, Heska Des Moines from January 2002 toApril 2008 and in other positions beginning in June 1997. Prior to joining the Company, Dr. McGinley held positions with BayerAnimal Health and Fort Dodge Laboratories. He holds Ph.D. and MS degrees in Immunobiology from Iowa State University andsuccessfully completed the Advanced Management Program at the Harvard Business School in 2008.Nancy Wisnewski, Ph.D. was appointed Executive Vice President, Diagnostic Operations and Product Development inSeptember 2016. She previously served as Executive Vice President, Product Development and Customer Service from April 2011 toSeptember 2016 and as Vice President, Product Development and Technical Customer Service from December 2006 to April 2011.From January 2006 to November 2006, Dr. Wisnewski was Vice President, Research and Development. Dr. Wisnewski held variouspositions in Heska's Research and Development organization between 1993 and 2005. She holds a Ph.D. in Parasitology/Biochemistryfrom the University of Notre Dame and a BS in Biology from Lafayette College.Steven M. Eyl was appointed Executive Vice President, Global Sales and Marketing in September 2016. He previously served asour Executive Vice President, Commercial Operations from May 2013 to September 2016. Mr. Eyl was a principal of Eyl BusinessServices, a consulting firm, from January 2012 to May 2013. He was President of Sound Technologies, Inc. ("Sound") from 2000 to2011, including after Sound's acquisition by VCA Antech, Inc. in 2004. Mr. Eyl has an extensive background in medical technologysales. He is a graduate of Indiana University.Steven M. Asakowicz was appointed Executive Vice President, Companion Animal Health Sales in February 2013. From July2011 to February 2013, he was employed by Cuattro, LLC as Vice President, Sales – US Veterinary and sold exclusively on behalf ofCuattro Veterinary USA, LLC. Mr. Asakowicz previously worked as Sales Director for Sound Technologies, Inc. ("Sound") fromNovember 2002 to June 2011, including after Sound was acquired by VCA Antech, Inc. in 2004. Prior to entering the animal healthmarket, Mr. Asakowicz spent 3.5 years employed by Smith Micro Software, Inc. as a Sales Manager and spent 7.5 years employed byAirTouch Cellular and PacTel Cellular (currently Verizon Wireless) as a Corporate Account Executive. Mr. Asakowicz holds a B.A.degree from San Diego State University.-11-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Rodney A. Lippincott was appointed Executive Vice President, Companion Animal Health Sales in February 2013. From July2011 to February 2013, he was employed by Cuattro, LLC as Vice President, Sales – US Veterinary and sold exclusively on behalf ofCuattro Veterinary USA, LLC. Mr. Lippincott held various positions including Sales Director for Sound Technologies, Inc., a unit ofVCA Antech, Inc., from September 2007 to June 2011. Prior to entering the animal health market, Mr. Lippincott spent 13.5 yearsemployed by Smith Micro Software, Inc. and held positions including US and International Sales Manager and Director of Marketing.Mr. Lippincott attended Saddleback College and completed the Executive Education Marketing Management Program at StanfordUniversity, Graduate School of Business.Item 1A.Risk FactorsOur future operating results may vary substantially from period to period due to a number of factors, many of which are beyondour control. The following discussion highlights some of these factors and the possible impact of these factors on future results ofoperations. The risks and uncertainties described below are not the only ones we face. Additional risks or uncertainties not presentlyknown to us or that we deem to be currently immaterial also may impair our business operations. If any of the following factors actuallyoccur, our business, financial condition or results of operations could be harmed. In that case, the price of our Public Common Stockcould decline and investors in our Public Common Stock could experience losses on their investment.We have significant related party transactions, including the planned purchase of the minority interest in Heska Imaging US,LLC via a put option which has been exercised.Under the Amended and Restated Operating Agreement of Heska Imaging (the "Operating Agreement"), should Heska Imaging("US Imaging") meet certain performance criteria, the unit holders who hold 45.4% of US Imaging that we do not own (the "ImagingMinority") have been granted a put option to sell us all of the Imaging Minority's position in US Imaging following the audit of ourfinancial statements for 2016. Required performance criteria have been met and we have been given notice that the put option is beingexercised. We have 90 days from the receipt of notice to deliver payment (any applicable payment in aggregate to be defined as the"Put Payment") for the Imaging Minority’s position, and we consider notice to have been received immediately prior to the filing of thisForm 10-K with the SEC. We plan to deliver the Put Payment and obtain the Imaging Minority’s position in US Imaging on May 31,2017. Based on US Imaging’s 2016 financial performance, the Put Payment is to be for a value of $13.8 million if we deliver all cash orup to $14.6 million if we deliver a combination of cash and the maximum contractually allowable value of stock. While we have theright to deliver up to 55% of the consideration in our Public Common Stock under certain circumstances, such stock is to be valuedbased on 90% of market value (the "Delivery Stock Value") and is limited to approximately 650 thousand shares in any case. If theDelivery Stock Value per share is less than the market value per share of our Public Common Stock at the time of the Acquisition, wedo not have the right to deliver any Public Common Stock as consideration. While we have reported the Put Payment at $14.6 millionfor financial reporting purposes, which contemplates our delivery of 55% of the Put Payment consideration in Public Common Stock,no final decision by our Board of Directors as to the relative use of cash and stock has been made and we may not be able to deliverany stock based on the Delivery Stock Value at the time of closing, as discussed above. If we are unable to deliver any stock for the PutPayment, it would likely put a strain on our financial position and require us to use our line of credit or raise additional capital andwould likely limit our ability to pursue acquisitions and other strategic development activities. There is no guarantee that our line ofcredit will be available in all circumstances or that additional capital will be available if needed on reasonable terms, if at all.Under the terms of the Operating Agreement, US Imaging is to be managed by a three-person board of managers, two of whichare to be appointed by Heska Corporation and one of which is to be appointed by Kevin S. Wilson, a founder of Heska Imaging whohas also been Heska Corporation's Chief Executive Officer-12-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.and President since March 31, 2014. The current board of managers consists of Mr. Wilson, Jason A. Napolitano, Heska Corporation'sChief Operating Officer, Chief Strategist and Secretary and Nancy Wisnewski, Ph.D., Heska Corporation's Executive Vice President,Diagnostic Operations & Product Development. Until the earlier of (1) our acquiring 100% of the units of US Imaging pursuant to theputs and/or calls discussed above or (2) the sixth anniversary of the Acquisition, US Imaging may only take the following actions,among others, by unanimous consent of the board of managers: (i) issue securities, (ii) incur, guarantee, prepay, refinance, renew,modify or extend debt, (iii) enter into material contracts, (iv) hire or terminate an officer or amend the terms of their employment, (v)make a distribution other than a tax or liquidation distribution, (vi) enter into a material acquisition or disposition arrangement or amerger, (vii) lease or acquire an interest in real property, (viii) convert or reorganize US Imaging, or (ix) amend its certificate offormation or the Operating Agreement. This unanimous consent provision may hinder our ability to optimize the value of ourinvestment in US Imaging in certain circumstances. We expect to make a distribution payment required under the Operating Agreementrelated to the profitability of US Imaging since January 1, 2013 (the "Distribution Payment") on April 1, 2017.We negotiated at arm's length as part of the acquisition, an Amended and Restated Master License Agreement and a SupplyAgreement between US Imaging and Cuattro, LLC. Mr. Wilson has an interest in these agreements and any time and resources devotedto monitoring and overseeing this relationship may prevent us from deploying such time and resources on more productive matters.Mr. Wilson's employment agreement with us acknowledges that Mr. Wilson has business interests in Cuattro, LLC, CuattroSoftware, LLC and Cuattro Medical, LLC which may require a portion of his time, resources and attention in his working hours. If Mr.Wilson is distracted by these or other business interests, he may not contribute as much as he otherwise would have to enhancing ourbusiness, to the detriment of our shareholder value. Mr. Wilson is the spouse of Shawna M. Wilson ("Mrs. Wilson"). Mr. Wilson, Mrs.Wilson and trusts for their children and family own a majority interest in Cuattro Medical, LLC. In addition, including shares held byMrs. Wilson and by trusts for the benefit of Mr. and Mrs. Wilson's children and family, Mr. Wilson also owns a 100% interest inCuattro, LLC, the largest supplier to Heska Imaging Global, LLC ("Global Imaging"), our wholly-owned subsidiary. Cuattro, LLC ownsa 100% interest in Cuattro Software, LLC.Cuattro, LLC has charged US Imaging $3.6 million from January 1, 2016 through May 31, 2016 and has charged GlobalImaging $10.9 million from June 1, 2016 through December 31, 2016, primarily related to digital imaging products, for which there isan underlying supply contract with minimum purchase obligations, software and services as well as other operating expenses; HeskaCorporation has charged US Imaging $5.3 million during 2016, primarily related to sales and other administrative expenses; and HeskaCorporation has charged Cuattro, LLC $0.2 million during 2016, primarily related to facility usage and other services.At December 31, 2016, US Imaging had a $1.6 million note receivable, including accrued interest, from International Imaging,which is due on June 15, 2019 and which eliminates in consolidation of the Company's financial statements. This note was previouslylisted as "Note receivable - related party" on the Company's consolidated balance sheets and the note receivable was assumed as part ofthe Company's acquisition of Cuattro International. At December 31, 2016, Heska Corporation had accounts receivable from USImaging of $5.6 million, including accrued interest; Heska Corporation had net accounts receivable from Cuattro, LLC of $22thousand; Global Imaging had net prepaid receivables from US Imaging of $1.2 million; and US Imaging had a net receivable due fromCuattro, LLC of $78 thousand. All monies owed accrue interest at the same interest rate Heska Corporation pays under its credit andsecurity agreement with Wells Fargo once past due with the exception of the note receivable, which accrues at this rate to its maturitydate.-13-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Mrs. Wilson, Clint Roth, DVM, Mr. Asakowicz, Mr. Lippincott, Mr. Wilson and Cuattro, LLC own approximately 29.75%,8.39%, 4.09%, 3.07%, 0.05% and 0.05% of US Imaging, respectively, each are a member of US Imaging, and each have an interest inthe Put Payment and Distribution Payment discussed above. If Mr. Wilson, Mr. Asakowicz or Mr. Lippincott is distracted by theseholdings or interests, they may not contribute as much as they otherwise would have to enhancing our business, to the detriment of ourshareholder value. While the Operating Agreement was negotiated at arm's length as part of the Acquisition, and requires that none ofthe members shall cause US Imaging to operate its business in any manner other than the ordinary course of business, any time andresources devoted to monitoring and overseeing this relationship may prevent us from deploying such time and resources on moreproductive matters.We may face costly legal disputes, including related to our intellectual property or technology or that of our suppliers orcollaborators.We may face legal disputes related to our business. For example, on March 12, 2015, a complaint was filed against us by ShaunFauley in the United States District Court Northern District of Illinois alleging our transmittal of unauthorized faxes in violation of thefederal Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Act of 2005, as a class action seekingstated damages of the greater of actual monetary loss or five hundred dollars per violation. Even if meritless, these disputes may requiresignificant expenditures on our part and could entail a significant distraction to members of our management team or other keyemployees. Insurance coverage may not cover any costs required to litigate a legal dispute or an unfavorable ruling or settlement. Alegal dispute leading to an unfavorable ruling or settlement, whether or not insurance coverage may be available for any portionthereof, could have significant material adverse consequences on our business. We may have to use legal means and incur affiliatedcosts to secure the benefits to which we are entitled, such as to collect payment for goods shipped to third parties, which would reduceour income as compared to what it otherwise would have been.We may become subject to patent infringement claims and litigation in the United States or other countries or interferenceproceedings conducted in the United States Patent and Trademark Office, or USPTO, to determine the priority of inventions. Thedefense and prosecution of intellectual property suits, USPTO interference proceedings and related legal and administrative proceedingsare likely to be costly, time-consuming and distracting. As is typical in our industry, from time to time we and our collaborators andsuppliers have received, and may in the future receive, notices from third parties claiming infringement and invitations to take licensesunder third-party patents. Any legal action against us or our collaborators or suppliers may require us or our collaborators or suppliersto obtain one or more licenses in order to market or manufacture effected products or services. However, we or our collaborators orsuppliers may not be able to obtain licenses for technology patented by others on commercially reasonable terms, or at all, or todevelop alternative approaches to access or replace such technology if unable to obtain licenses or current and future licenses may notbe adequate, any of which could substantially harm our business.We may also need to pursue litigation to enforce any patents issued to us or our collaborative partners, to protect trade secrets orknow-how owned by us or our collaborative partners, or to determine the enforceability, scope and validity of the proprietary rights ofothers. Any litigation or interference proceedings will likely result in substantial expense to us and significant diversion of the efforts ofour technical and management personnel. Any adverse determination in litigation or interference proceedings could subject us tosignificant liabilities to third parties. Further, as a result of litigation or other proceedings, we may be required to seek licenses fromthird parties which may not be available on commercially reasonable terms, if at all.-14-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.If the third parties who have substantial marketing rights for certain of our historical products, existing products or futureproducts under development are not successful in marketing those products, then our sales and financial position may suffer.We are party to an agreement with Merck Animal Health, which grants Merck Animal Health exclusive distribution andmarketing rights for our canine heartworm preventive product, TRI-HEART Plus Chewable Tablets, ultimately sold to or throughveterinarians in the United States and Canada. Historically, a significant portion of our OVP segment's revenue has been generated fromthe sale of certain bovine vaccines, which have been sold primarily under the Titanium® and MasterGuard® brands. We have a supplyagreement with Eli Lilly and its affiliates operating through Elanco for the production of these vaccines. Either of these marketingpartners may not devote sufficient resources to marketing our products and our sales and financial position could suffer significantly asa result. Revenue from Merck & Co., Inc. ("Merck") entities, including Merck Animal Health, represented 11% of our 2016 revenue.Revenue from Eli Lilly entities, including Elanco, represented 12% of our 2016 revenue. If Merck Animal Health personnel fail tomarket, sell and support our heartworm preventive sufficiently or if Elanco personnel fail to market, sell and support the bovinevaccines we produce and sell to Elanco sufficiently, our sales could decline significantly. Furthermore, there may be nothing to preventthese partners from pursuing alternative technologies, products or supply arrangements, including as part of mergers, acquisitions ordivestitures. For example, we believe a unit of Merck has obtained FDA approval for a canine heartworm preventive product withadditional claims compared with our TRI-HEART Plus Chewable Tablets, but which we believe is not currently being marketedactively. Should Merck decide to emphasize sales and marketing efforts of this product rather than our TRI-HEART Plus ChewableTablets or cancel our agreement regarding canine heartworm preventive distribution and marketing, our sales could declinesignificantly. In another example, if Elanco were to emphasize sales and marketing efforts for bovine vaccines other than those weproduce or cancel our supply agreement and produce the vaccines we supply to it by itself, our sales could decline significantly. Third-party marketing assistance may not be available in the future on reasonable terms, if at all. If the third parties with marketing rights forour products were to merge or go out of business, the sale and promotion of our products could be diminished.We rely substantially on third-party suppliers. The loss of products or delays in product availability from one or more third-party suppliers could substantially harm our business.To be successful, we must contract for the supply of, or manufacture ourselves, current and future products of appropriatequantity, quality and cost. Such products must be available on a timely basis and be in compliance with any regulatory requirements.Similarly, we must provide ourselves, or contract for the supply of, certain services. Such services must be provided in a timely andappropriate manner. Failure to do any of the above could substantially harm our business.We rely on third-party suppliers to manufacture those products we do not manufacture ourselves and to provide services we donot provide ourselves. Proprietary products provided by these suppliers represent a majority of our revenue. We currently rely on thesesuppliers for our blood testing instruments and consumable supplies for these instruments, for our imaging products and relatedsoftware and services, for key components of our point-of-care diagnostic tests as well as for the manufacture of other products.The loss of access to products from one or more suppliers could have a significant, negative impact on our business. Majorsuppliers who sell us proprietary products who are responsible for more than 5% of our LTM revenue are FUJIFILM Corporation andCuattro, LLC. None of these suppliers sold us products which were responsible for more than 25% of our LTM revenue, althoughproducts purchased from one of these suppliers was responsible for more than 20% of our LTM revenue and products purchased fromanother was responsible for more than 15% of our LTM revenue. We often purchase products from our suppliers under agreements thatare of limited duration or potentially can be terminated on an annual basis. In the case-15-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.of our blood testing instruments and our digital radiography solutions, post-termination, we are typically entitled to non-exclusiveaccess to consumable supplies, or ongoing non-exclusive access to products and services to meet the needs of an existing customerbase, respectively, for a defined period upon expiration of exclusive rights, which could subject us to competitive pressures in theperiod of non-exclusive access. Although we believe we will be able to maintain a supply of our major product and service offerings inthe near future, there can be no assurance that our suppliers will meet their obligations under any agreements we may have in placewith them or that we will be able to compel them to do so. Risks of relying on suppliers include:•Inability to meet minimum obligations. Current agreements, or agreements we may negotiate in the future, may commit us tocertain minimum purchase or other spending obligations. It is possible we will not be able to create the market demand tomeet such obligations, which could create a drain on our financial resources and liquidity. Some such agreements mayrequire minimum purchases and/or sales to maintain product rights and we may be significantly harmed if we are unable tomeet such requirements and lose product rights.•Loss of exclusivity. In the case of our blood testing instruments, if we are entitled to non-exclusive access to consumablesupplies for a defined period upon expiration of exclusive rights, we may face increased competition from a third party withsimilar non-exclusive access or our former supplier, which could cause us to lose customers and/or significantly decreaseour margins and could significantly affect our financial results. In addition, current agreements, or agreements we maynegotiate in the future, with suppliers may require us to meet minimum annual sales levels to maintain our position as theexclusive distributor of these products. We may not meet these minimum sales levels and maintain exclusivity over thedistribution and sale of these products. If we are not the exclusive distributor of these products, competition may increasesignificantly, reducing our revenues and/or decreasing our margins.•Changes in economics. An underlying change in the economics with a supplier, such as a large price increase or newrequirement of large minimum purchase amounts, could have a significant, adverse effect on our business, particularly if weare unable to identify and implement an alternative source of supply in a timely manner.•The loss of product rights upon expiration or termination of an existing agreement. Unless we are able to find an alternatesupply of a similar product, we would not be able to continue to offer our customers the same breadth of products and oursales and operating results would likely suffer. In the case of an instrument supplier, we could also potentially suffer the lossof sales of consumable supplies, which would be significant in cases where we have built a significant installed base, furtherharming our sales prospects and opportunities. Even if we were able to find an alternate supply for a product to which welost rights, we would likely face increased competition from the product whose rights we lost being marketed by a thirdparty or the former supplier and it may take us additional time and expense to gain the necessary approvals and launch analternative product.•High switching costs. In our blood testing instrument products, we could face significant competition and lose all or some ofthe consumable revenues from the installed base of those instruments if we were to switch to a competitive instrument. If weneed to change to other commercial manufacturing contractors for certain of our regulated products, additional regulatorylicenses or approvals generally must be obtained for these contractors prior to our use. This would require new testing andcompliance inspections prior to sale, thus resulting in potential delays. Any new manufacturer would have to be educated in,or develop, substantially equivalent processes necessary for the production of our products. We likely would have to trainour sales-16-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.force, distribution network employees and customer support organization on the new product and spend significant fundsmarketing the new product to our customer base.•The involuntary or voluntary discontinuation of a product line. Unless we are able to find an alternate supply of a similarproduct in this or similar circumstances with any product, we would not be able to continue to offer our customers the samebreadth of products and our sales would likely suffer. Even if we are able to identify an alternate supply, it may take usadditional time and expense to gain the necessary approvals and launch an alternative product, especially if the product isdiscontinued unexpectedly.•Inconsistent or inadequate quality control. We may not be able to control or adequately monitor the quality of products wereceive from our suppliers. Poor quality items could damage our reputation with our customers.•Limited capacity or ability to scale capacity. If market demand for our products increases suddenly, our current suppliersmight not be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements andmay result in substantial delays in meeting market demand. If we consistently generate more demand for a product than agiven supplier is capable of handling, it could lead to large backorders and potentially lost sales to competitive products thatare readily available. This could require us to seek or fund new sources of supply, which may be difficult to find or mayrequire terms that are less advantageous if available at all.•Regulatory risk. Our manufacturing facility and those of some of our third-party suppliers are subject to ongoing periodicunannounced inspection by regulatory authorities, including the FDA, USDA and other federal, state and foreign agenciesfor compliance with strictly enforced Good Manufacturing Practices, regulations and similar foreign standards. We do nothave control over our suppliers' compliance with these regulations and standards. Regulatory violations could potentiallylead to interruptions in supply that could cause us to lose sales to readily available competitive products. If one of oursuppliers is unable to provide a raw material or finished product due to regulatory issues, it could have a material adversefinancial impact on our business and could expose us to legal action if we are unable to perform on contracts to ourcustomers involving related products.•Developmental delays. We may experience delays in the scale-up quantities needed for product development that coulddelay regulatory submissions and commercialization of our products in development, causing us to miss key opportunities.•Limited geographic rights. We typically do not have global geographic rights to products supplied by third parties. If wewere to determine a market opportunity in a geography where we did not have distribution rights and were unable to obtainsuch rights from the supplier, it might hamper our ability to succeed in such geography and our sales and profits would belower than they otherwise would have been.•Limited intellectual property rights. We typically do not have intellectual property rights, or may have to share intellectualproperty rights, to the products supplied by third parties and any improvements to the manufacturing processes or newmanufacturing processes for these products.Potential problems with suppliers such as those discussed above could substantially decrease sales, lead to higher costs and/ordamage our reputation with our customers due to factors such as poor quality goods or delays in order fulfillment, resulting in our beingunable to sell our products effectively and substantially harming our business.-17-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The loss of significant customers who, for example, are historically large purchasers or who are considered leaders in theirfield could damage our business and financial results.Revenue from Butler Animal Health Supply, LLC d/b/a Henry Schein Animal Health ("Henry Schein") representedapproximately 13% and 10% of our consolidated revenue for the years ended December 31, 2016 and 2015, respectively. Revenuefrom Merck entities, including Merck Animal Health, represented approximately 11% each for the years ended December 31, 2016 and2015 and 12% for the year ended December 31, 2014. Revenue from Eli Lilly entities, including Elanco, represented approximately12%, 12% and 11% for the years ended December 31, 2016, 2015, and 2014, respectively. No other customer accounted for more than10% of our consolidated revenue for the years ended December 31, 2016, 2015 or 2014.Henry Schein represented 16% of our consolidated accounts receivable at December 31, 2016. Merck entities representedapproximately 11% and 13% of our consolidated accounts receivable at December 31, 2016 and 2015, respectively. Eli Lilly entities,including Elanco, represented approximately 15% and 20% of our consolidated accounts receivable at December 31, 2016 and 2015,respectively. No other customer accounted for more than 10% of our consolidated accounts receivable at December 31, 2016 or 2015.The loss of significant customers who, for example, are historically large purchasers or who are considered leaders in their fieldcould damage our business, reputation, and financial results.We operate in a highly competitive industry, which could render our products obsolete or substantially limit the volume ofproducts that we sell. This would limit our ability to compete and maintain sustained profitability.The market in which we compete is intensely competitive. Our competitors include independent animal health companies andmajor pharmaceutical companies that have animal health divisions. We also compete with independent, third-party distributors,including distributors who sell products under their own private labels. In the point-of-care diagnostic testing market, our majorcompetitors include IDEXX Laboratories, Inc. ("IDEXX"), Abaxis Inc. ("Abaxis"), and Zoetis Inc. ("Zoetis"). The productsmanufactured by our OVP segment for sale by third parties compete with similar products offered by a number of other companies,some of which have substantially greater financial, technical, research and other resources than us and may have more establishedmarketing, sales, distribution and service organizations than those of our OVP segment customers. Competitors may have facilities withsimilar capabilities to our OVP segment, which they may operate and sell at a lower unit price to customers than our OVP segmentdoes, which could cause us to lose customers. Companies with a significant presence in the companion animal health market, such asBayer AG, CEVA Santé Animale, Eli Lilly, Merck, Sanofi, Vétoquinol S.A. and Virbac S.A. may be marketing or developing productsthat compete with our products or would compete with them if developed. These and other competitors and potential competitors mayhave substantially greater financial, technical, research and other resources and larger, more established marketing, sales and serviceorganizations than we do. For example, if Zoetis devotes its significant commercial and financial resources to growing its market sharein the veterinary allergy market, our allergy-related sales could suffer significantly. Our competitors may offer broader product linesand have greater name recognition than we do. Our competitors may also develop or market technologies or products that are moreeffective or commercially attractive than our current or future products or that would render our technologies and products obsolete.Further, additional competition could come from new entrants to the animal health care market. Moreover, we may not have thefinancial resources, technical expertise or marketing, sales or support capabilities to compete successfully. One of our competitors,Abaxis, has announced agreements with units of VCA Inc. ("VCA") for the long-term supply of blood chemistry testing products toVCA-owned veterinary clinics and for the co-marketing of Abaxis' blood chemistry testing products with VCA's veterinary diagnosticlaboratory offering, which may serve to intensify competition and lower our margins as well as limit our prospects to sell bloodchemistry testing products to VCA-owned veterinary clinics.-18-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.If we fail to compete successfully, our ability to achieve sustained profitability will be limited and sustained profitability, orprofitability at all, may not be possible.We depend on key personnel for our future success. If we lose our key personnel or are unable to attract and retain additionalpersonnel, we may be unable to achieve our goals.Our future success is substantially dependent on the efforts of our senior management and other key personnel, including ourChief Executive Officer and President, Kevin Wilson. The loss of the services of members of our senior management or other keypersonnel may significantly delay or prevent the achievement of our business objectives. Although we have employment agreementswith many of these individuals, all are at-will employees, which means that either the employee or Heska may terminate employment atany time without prior notice. If we lose the services of, or fail to recruit, key personnel, the growth of our business could besubstantially impaired. We do not maintain key person life insurance for any of our senior management or key personnel.We may be unable to market and sell our products successfully.We may not develop and maintain marketing and/or sales capabilities successfully, and we may not be able to makearrangements with third parties to perform these activities on satisfactory terms. If our marketing and sales strategy is unsuccessful, ourability to sell our products will be negatively impacted and our revenues will decrease. This could result in the loss of distribution rightsfor products or failure to gain access to new products and could cause damage to our reputation and adversely affect our business andfuture prospects.The market for companion animal healthcare products is highly fragmented. Because our CCA proprietary products aregenerally available only to veterinarians or by prescription and our medical instruments require technical training to operate, weultimately sell all our CCA products primarily to or through veterinarians. The acceptance of our products by veterinarians is critical toour success. Changes in our ability to obtain or maintain such acceptance or changes in veterinary medical practice could significantlydecrease our anticipated sales. As the vast majority of cash flow to veterinarians ultimately is funded by pet owners without privateinsurance or government support, our business may be more susceptible to severe economic downturns than other health carebusinesses which rely less on individual consumers.We have entered into agreements with independent third party distributors, including Henry Schein, which we anticipated tomarket and sell our products to a greater degree than in the recent past. Independent third-party distributors may be effective inincreasing sales of our products to veterinarians, although we would expect a corresponding lower gross margin as such distributorstypically buy products from us at a discount to end user prices. It is possible new or existing independent third-party distributors couldcannibalize our direct sales efforts and lower our total gross margin. For us to be effective when working with an independent third-party distributor, the distributor must agree to market and/or sell our products and we must provide proper economic incentives to thedistributor as well as contend effectively for the time, energy and focus of the employees of such distributor given other products thedistributor may be carrying, potentially including those of our competitors. If we fail to be effective with new or existing independentthird-party distributors, our financial performance may suffer.-19-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.We intend to pursue acquisitions and other strategic development opportunities, which may not result as desired and could bedetrimental to our financial position.We intend to pursue acquisitions and other strategic development opportunities. The ultimate business and financialperformance of these opportunities may not create, and may end up adversely affecting materially, the value we hope to enhance bypursuing them. Any acquisition may significantly underperform relative to our financial expectations and may serve to diminish ratherthan enhance shareholder value.The success of any acquisition will depend on, among other things, our ability to integrate assets and personnel acquired inthese transactions and to apply our internal controls process to these acquired businesses. The integration of acquisitions may requiresignificant attention from our management, and the diversion of management's attention and resources could have a material adverseeffect on our ability to manage our business. Furthermore, we may not realize the degree or timing of benefits we anticipated when wefirst entered into the acquisition transaction. If actual integration costs are higher than amounts originally anticipated, if we are unable tointegrate the assets and personnel acquired in an acquisition as anticipated, or if we are unable to fully benefit from anticipatedsynergies, our business, financial condition, results of operations, and cash flows could be materially adversely affected. Furthermore, itis possible we will use management time and resources to pursue opportunities we ultimately are unable or decide not to consummate,in which case, we may not be able to utilize such management time and resources on what may have proved to be more productivematters in other areas of our business.We have historically not consistently generated positive cash flow from operations, may need additional capital and anyrequired capital may not be available on reasonable terms or at all.We may be required to raise additional capital in the future. If necessary, we expect to raise these additional funds by borrowingunder our revolving line of credit, the increased sale of customer leases, the sale of equity securities or the issuance of new term debtsecured by the same category of assets as the term loans which we fully repaid in 2010. There is no guarantee that additional capitalwill be available from these sources on reasonable terms, if at all, and certain of these sources may require approval by existing lenders.Under our credit and security agreement with Wells Fargo, we are required to comply with various covenants, both financial and non-financial, in order to borrow under the agreement. The availability of borrowings under this agreement is expected to be important tocontinue to fund our operations. A key financial covenant is based on a fixed charge coverage ratio, as defined in the credit andsecurity agreement with Wells Fargo. Although we believe we will be able to maintain compliance with all these covenants and anycovenants we may negotiate in the future, there can be no assurance thereof. We have not always been able to maintain compliancewith all covenants under our credit and security agreement with Wells Fargo. Although Wells Fargo has granted us a waiver of non-compliance in each case, there can be no assurance we will be able to obtain similar waivers or other modifications if needed in thefuture on economic terms, if at all. Failure to comply with any of the covenants, representations or warranties, or failure to modify themto allow future compliance, could result in our being in default and could cause all outstanding borrowings under our credit andsecurity agreement to become immediately due and payable, or impact our ability to borrow under the agreement. In addition, WellsFargo has discretion in setting the advance rates which we may borrow against eligible assets. Accordingly, funds we expect to beavailable under our existing revolving line of credit may not be available and other lenders could refuse to provide us with additionaldebt financing. Financial institutions and other potentially interested parties may not be interested in purchasing our customer leases oneconomic terms, or at all. The public markets may be unreceptive to equity financings and we may not be able to obtain additionalprivate equity or debt financing. Any equity financing would likely be dilutive to stockholders and additional debt financing, ifavailable, may include restrictive covenants and increased interest rates that would limit our currently planned operations and strategies.Furthermore, even if additional-20-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.capital is available, it may not be of the magnitude required to meet our needs under these or other scenarios. If additional funds arerequired and are not available, it would likely have a material adverse effect on our business, financial condition and our ability tocontinue as a going concern.Our future revenues depend on successful product development, commercialization and/or market acceptance, any of whichcan be slower than we expect or may not occur.The product development and regulatory approval process for many of our potential products is extensive and may takesubstantially longer than we anticipate. Research projects may fail. New products that we may be developing for the veterinarymarketplace may not perform consistently within our expectations. Because we have limited resources to devote to productdevelopment and commercialization, any delay in the development of one product or reallocation of resources to product developmentefforts that prove unsuccessful may delay or jeopardize the development of other product candidates. If we fail to successfully developnew products and bring them to market in a timely manner, our ability to generate additional revenue will decrease.Even if we are successful in the development of a product or obtain rights to a product from a third-party supplier, we mayexperience delays or shortfalls in commercialization and/or market acceptance of the product. For example, veterinarians may be slowto adopt a product, a product may not achieve the anticipated technical performance in field use or there may be delays in producinglarge volumes of a product. The former is particularly likely where there is no comparable product available or historical precedent forsuch a product. The ultimate adoption of a new product by veterinarians, the rate of such adoption and the extent veterinarians chooseto integrate such a product into their practice are all important factors in the economic success of any new products and are factors thatwe do not control to a large extent. If our products do not achieve a significant level of market acceptance, demand for our productswill not develop as expected and our revenues will be lower than we anticipate.Our stock price has historically experienced high volatility, and could do so in the future, including experiencing a materialprice decline resulting from a large sale in a short period of time.Should a relatively large shareholder decide to sell a large number of shares in a short period of time, it could lead to an excesssupply of our shares available for sale and correspondingly result in a significant decline in our stock price.The securities markets have experienced significant price and volume fluctuations and the market prices of securities of manysmall cap companies have in the past been, and can in the future be expected to be, especially volatile. During the twelve months endedDecember 31, 2016, the closing stock price of our Public Common Stock has ranged from a low of $27.05 to a high of $72.85.Fluctuations in the trading price or liquidity of our Public Common Stock may adversely affect our ability to raise capital through futureequity financings. Factors that may have a significant impact on the market price and marketability of our Public Common Stockinclude:•stock sales by large stockholders or by insiders;•changes in the outlook for our business;•our quarterly operating results, including as compared to expected revenue or earnings and in comparison to historicalresults;•termination, cancellation or expiration of our third-party supplier relationships;•announcements of technological innovations or new products by our competitors or by us;•litigation;•regulatory developments, including delays in product introductions;•developments or disputes concerning patents or proprietary rights;•availability of our revolving line of credit and compliance with debt covenants;-21-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.•releases of reports by securities analysts;•economic and other external factors; and•general market conditions.In the past, following periods of volatility in the market price of a company's securities, securities class action litigation hasoften been instituted. If a securities class action suit is filed against us, it is likely we would incur substantial legal fees and ourmanagement's attention and resources would be diverted from operating our business in order to respond to the litigation.On May 4, 2010, our shareholders approved an amendment (the "Amendment") to our Restated Certificate of Incorporation.The Amendment places restrictions on the transfer of our stock that could adversely affect our ability to use our domestic Federal NetOperating Loss carryforward ("NOL"). In particular, the Amendment prevents the transfer of shares without the approval of our Boardof Directors if, as a consequence, an individual, entity or groups of individuals or entities would become a 5-percent holder underSection 382 of the Internal Revenue Code of 1986, as amended, and the related Treasury regulations, and also prevents any existing 5-percent holder from increasing his or her ownership position in the Company without the approval of our Board of Directors. Anytransfer of shares in violation of the Amendment (a "Transfer Violation") shall be void ab initio under the our Restated Certificate ofIncorporation, as amended (our "Certificate of Incorporation") and our Board of Directors has procedures under our Certificate ofIncorporation to remedy a Transfer Violation including requiring the shares causing such Transfer Violation to be sold and any profitresulting from such sale to be transferred to a charitable entity chosen by the Company's Board of Directors in specified circumstances.The Amendment could have an adverse impact on the value and trading liquidity of our stock if certain buyers who would otherwisehave bid on or purchased our stock, including buyers who may not be comfortable owning stock with transfer restrictions, do not bidon or purchase our stock as a result of the Amendment. In addition, because some corporate takeovers occur through the acquirer'spurchase, in the public market or otherwise, of sufficient shares to give it control of a company, any provision that restricts the transferof shares can have the effect of preventing a takeover. The Amendment could discourage or otherwise prevent accumulations ofsubstantial blocks of shares in which our stockholders might receive a substantial premium above market value and might tend toinsulate management and the Board of Directors against the possibility of removal to a greater degree than had the Amendment notpassed.Obtaining and maintaining regulatory approvals in order to market our products may be costly and delay the marketing andsales of our products. Failure to meet all regulatory requirements could cause significant losses from affected inventory and the lossof market share.Many of the products we develop, market or manufacture may subject us to extensive regulation by one or more of the USDA,the FDA, the EPA and foreign and other regulatory authorities. These regulations govern, among other things, the development, testing,manufacturing, labeling, storage, pre-market approval, advertising, promotion and sale of some of our products. Satisfaction of theserequirements can take several years and time needed to satisfy them may vary substantially, based on the type, complexity and noveltyof the product. The decision by a regulatory authority to regulate a currently non-regulated product or product area could significantlyimpact our revenue and have a corresponding adverse impact on our financial performance and position while we attempt to complywith the new regulation, if such compliance is possible at all.The effect of government regulation may be to delay or to prevent marketing of our products for a considerable period of timeand to impose costly procedures upon our activities. We may not be able to estimate the time to obtain required regulatory approvalsaccurately and such approvals may require significantly more time than we anticipate. We have experienced in the past, and mayexperience in the future, difficulties that could delay or prevent us from obtaining the regulatory approval or license necessary-22-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.to introduce or market our products. Such delays in approval may cause us to forego a significant portion of a new product's sales in itsfirst year due to seasonality and advanced booking periods associated with certain products. Regulatory approval of our products mayalso impose limitations on the indicated or intended uses for which our products may be marketed.Difficulties in making established products to all regulatory specifications may lead to significant losses related to affectedinventory as well as market share. Among the conditions for certain regulatory approvals is the requirement that our facilities and/or thefacilities of our third-party manufacturers conform to current Good Manufacturing Practices and other requirements. If any regulatoryauthority determines that our manufacturing facilities or those of our third-party manufacturers do not conform to appropriatemanufacturing requirements, we or the manufacturers of our products may be subject to sanctions, including, but not limited to,warning letters, manufacturing suspensions, product recalls or seizures, injunctions, refusal to permit products to be imported into orexported out of the United States, refusals of regulatory authorities to grant approval or to allow us to enter into government supplycontracts, withdrawals of previously approved marketing applications, civil fines and criminal prosecutions. Furthermore, third partiesmay perceive procedures required to obtain regulatory approval objectionable and may attempt to disrupt or otherwise damage ourbusiness as a result. In addition, certain of our agreements may require us to pay penalties if we are unable to supply products,including for failure to maintain regulatory approvals.Any of these events, alone or in combination with others, could damage our business.Interpretation of existing legislation, regulations and rules, including financial accounting standards, or implementation offuture legislation, regulations and rules could cause our costs to increase or could harm us in other ways.We prepare our financial statements in conformance with United States generally accepted accounting principles, or U.S.GAAP. These accounting principles are established by and are subject to interpretation by the SEC, the FASB and others who interpretand create accounting policies. A change in those policies can have a significant effect on our reported results and may affect ourreporting of transactions completed before a change is made effective. Such changes may adversely affect our reported financial resultsand the way we conduct our business, or have a negative impact on us if we fail to track such changes.If our regulators and/or auditors adopt or interpret more stringent standards than we anticipate, we could experienceunanticipated changes in our reported financial statements, including but not limited to restatements, which could adversely affect ourbusiness due to litigation and investor confidence in our financial statements. In addition, changes in the underlying circumstances towhich we apply given accounting standards and principles may affect our results of operations and have a negative impact on us. Forexample, we review goodwill recognized on our consolidated balance sheets at least annually and if we were to conclude there was animpairment of goodwill, we would reduce the corresponding goodwill to its estimated fair value and recognize a corresponding expensein our statement of operations. This impairment and corresponding expense could be as large as the total amount of goodwillrecognized on our consolidated balance sheets, which was $26.6 million at December 31, 2016. There can be no assurance that futuregoodwill impairments will not occur if projected financial results are not met, or otherwise.The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley") has increased our required administrative actions and expenses as a publiccompany since its enactment. The general and administrative costs of complying with Sarbanes-Oxley will depend on how it isinterpreted over time. Of particular concern are the level of standards for internal control evaluation and reporting adopted underSection 404 of Sarbanes-Oxley. If our regulators and/or auditors adopt or interpret more stringent standards than we anticipate, weand/or our auditors may be unable to conclude that our internal controls over financial reporting are designed and operating effectively,which could adversely affect investor confidence in our financial statements and cause-23-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.our stock price to decline. Even if we and our auditors are able to conclude that our internal control over financial reporting is designedand operating effectively in such a circumstance, our general and administrative costs are likely to increase. For example, in both 2016and 2015, we were required to have our independent registered public accountant conduct an audit of our internal control over financialreporting because as of June 30 of both years our stock market value was above a certain level prescribed by regulation. This increasedour general and administrative costs from what they otherwise would have been.Similarly, we are required to comply with the SEC's mandate to provide interactive data using the eXtensible Business ReportingLanguage as an exhibit to certain SEC filings. Compliance with this mandate has required a significant time investment, which has andmay in the future preclude some of our employees from spending time on more productive matters. In addition, actions by otherentities, such as enhanced rules to maintain our listing on the Nasdaq Capital Market, could also increase our general and administrativecosts or have other adverse effects on us, as could further legislative, regulatory or rule-making action or more stringent interpretationsof existing legislation, regulations and rules.We often depend on third parties for products we intend to introduce in the future. If our current relationships andcollaborations are not successful, we may not be able to introduce the products we intend to introduce in the future.We are often dependent on third parties and collaborative partners to successfully and timely perform research and developmentactivities to successfully develop new products. We routinely discuss Heska marketing in the veterinary market instruments beingdeveloped by third parties for use in the human health care market. In the future, one or more of these third parties or collaborativepartners may not complete research and development activities in a timely fashion, or at all. Even if these third parties are successful intheir research and development activities, we may not be able to come to an economic agreement with them. If these third parties orcollaborative partners fail to complete research and development activities or fail to complete them in a timely fashion, or if we areunable to negotiate economic agreements with such third parties or collaborative partners, our ability to introduce new products will beimpacted negatively and our revenues may decline.Many of our expenses are fixed and if factors beyond our control cause our revenue to fluctuate, this fluctuation could causegreater than expected losses, cash flow and liquidity shortfalls.We believe that our future operating results will fluctuate on a quarterly basis due to a variety of factors which are generallybeyond our control, including:•supply of products from third-party suppliers or termination, cancellation or expiration of such relationships;•competition and pricing pressures from competitive products;•the introduction of new products or services by our competitors or by us;•large customers failing to purchase at historical levels;•fundamental shifts in market demand;•manufacturing delays;•shipment problems;•information technology problems, which may prevent us from conducting our business effectively, or at all, and may alsoraise our costs;•regulatory and other delays in product development;•product recalls or other issues which may raise our costs;•changes in our reputation and/or market acceptance of our current or new products; and•changes in the mix of products sold.-24-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.We have high operating expenses, including those related to personnel. Many of these expenses are fixed in the short term andmay increase over time. If any of the factors listed above cause our revenues to decline, our operating results could be substantiallyharmed.Our Public Common Stock is listed on the Nasdaq Capital Market and we may not be able to maintain that listing, which maymake it more difficult for you to sell your shares. In addition, we have less than 300 holders of record, which would allow us toterminate voluntarily the registration of our common stock with the SEC and after which we would no longer be eligible to maintainthe listing of our Public Common Stock on the Nasdaq Capital Market.Our Public Common Stock is listed on the Nasdaq Capital Market. The Nasdaq has several quantitative and qualitativerequirements companies must comply with to maintain this listing. While we believe, we are currently in compliance with all Nasdaqrequirements, there can be no assurance we will continue to meet Nasdaq listing requirements, that Nasdaq will interpret theserequirements in the same manner we do if we believe we meet the requirements, or that Nasdaq will not change such requirements oradd new requirements to include requirements we do not meet in the future. If we are delisted from the Nasdaq Capital Market, ourPublic Common Stock may be considered a penny stock under the regulations of the SEC and would therefore be subject to rules thatimpose additional sales practice requirements on broker-dealers who sell our securities. The additional burdens imposed upon broker-dealers may discourage broker-dealers from effecting transactions in our Public Common Stock, which could severely limit marketliquidity of the Public Common Stock and any stockholder's ability to sell our securities in the secondary market. This lack of liquiditywould also likely make it more difficult for us to raise capital in the future.We have less than 300 holders of record as of our latest information, a fact which would make us eligible to terminatevoluntarily the registration of our common stock with the SEC and therefore suspend our reporting obligations with the SEC under theExchange Act and become a non-reporting company. If we were to cease reporting with the SEC, we would no longer be eligible tomaintain the listing of our common stock on the Nasdaq Capital Market, which we would expect to materially adversely affect theliquidity and market price for our common stock.We may not be able to continue to achieve sustained profitability or increase profitability on a quarterly or annual basis.Prior to 2005, we incurred net losses on an annual basis since our inception in 1988 and, as of December 31, 2016, we had anaccumulated deficit of $151.8 million. Relatively small differences in our performance metrics may cause us to generate an operating ornet loss in future periods. Our ability to continue to be profitable in future periods will depend, in part, on our ability to increase sales inour CCA segment, including maintaining and growing our installed base of instruments and related consumables, to maintain orincrease gross margins and to limit the increase in our operating expenses to a reasonable level as well as avoid or effectively manageany unanticipated issues. We may not be able to generate, sustain or increase profitability on a quarterly or annual basis. If we cannotachieve or sustain profitability for an extended period, we may not be able to fund our expected cash needs, including the repayment ofdebt as it comes due, or continue our operations.-25-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.We may face product returns and product liability litigation in excess of, or not covered by, our insurance coverage orindemnities and/or warranties from our suppliers. If we become subject to product liability claims resulting from defects in ourproducts, we may fail to achieve market acceptance of our products and our sales could substantially decline.The testing, manufacturing and marketing of our current products as well as those currently under development entail aninherent risk of product liability claims and associated adverse publicity. Following the introduction of a product, adverse side effectsmay be discovered. Adverse publicity regarding such effects could affect sales of our other products for an indeterminate time period.To date, we have not experienced any material product liability claims, but any claim arising in the future could substantially harm ourbusiness. Potential product liability claims may exceed the amount of our insurance coverage or may be excluded from coverage underthe terms of the policy. We may not be able to continue to obtain adequate insurance at a reasonable cost, if at all. In the event that weare held liable for a claim against which we are not indemnified or for damages exceeding the $10 million limit of our insurancecoverage or which results in significant adverse publicity against us, we may lose revenue, be required to make substantial paymentswhich could exceed our financial capacity and/or lose or fail to achieve market acceptance.We may be held liable for the release of hazardous materials, which could result in extensive remediation costs or otherwiseharm our business.Certain of our products and development programs produced at our Des Moines, Iowa facility involve the controlled use ofhazardous and bio hazardous materials, including chemicals and infectious disease agents. Although we believe that our safetyprocedures for handling and disposing of such materials comply with the standards prescribed by applicable local, state and federalregulations, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of such an accident, wecould be held liable for any fines, penalties, remediation costs or other damages that result. Our liability for the release of hazardousmaterials could exceed our resources, which could lead to a shutdown of our operations, significant remediation costs and potentiallegal liability. In addition, we may incur substantial costs to comply with environmental regulations if we choose to expand ourmanufacturing capacity.Item 1B.Unresolved Staff Comments.Not applicable.Item 2Properties.Our principal administrative and research and development activities are located in Loveland, Colorado. We currently leaseapproximately 60,000 square feet at a facility in Loveland, Colorado under an agreement which expires in 2023. Our principalproduction facility located in Des Moines, Iowa, consists of 168,000 square feet of buildings on 34 acres of land, which we own. Wealso own a 175-acre farm used principally for testing products, located in Carlisle, Iowa. Our European facility in Fribourg, Switzerlandhas approximately 6,000 square feet leased under an agreement which expires in 2022.Item 3Legal Proceedings.From time to time, we may be involved in litigation related to claims arising out of our operations. On March 12, 2015, acomplaint was filed against us by Shaun Fauley in the United States District Court Northern District of Illinois alleging our transmittal ofunauthorized faxes in violation of the federal Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention Actof 2005, as a class-26-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.action seeking stated damages of the greater of actual monetary loss or five hundred dollars per violation. We intend to defend theCompany vigorously in this matter. As of December 31, 2016, we were not a party to any other legal proceedings that are expected,individually or in the aggregate, to have a material adverse effect on our business, financial condition or operating results.Item 4 Mine Safety Disclosures.Not applicable.-27-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.PART IIItem 5Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities.Our Public Common Stock is quoted on the Nasdaq Capital Market under the symbol "HSKA." The following table sets forththe high and low sales prices for our Public Common Stock as reported by the Nasdaq Capital Market for the periods indicated below: High Low2015 First Quarter$26.68 $15.58Second Quarter$32.98 $23.22Third Quarter$35.72 $26.73Fourth Quarter$40.29 $27.592016 First Quarter$38.29 $27.00Second Quarter$40.73 $26.26Third Quarter$57.41 $37.49Fourth Quarter$74.33 $46.512017 First Quarter (through March 2, 2017)$95.98 $70.84As of February 28, 2017, there were approximately 256 holders of record of our Public Common Stock, includingapproximately 119 participant accounts of Cede & Co.'s position held with our registrar, and approximately 3,900 beneficialstockholders. We do not anticipate any dividend payments in the foreseeable future.-28-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.STOCK PRICE PERFORMANCE GRAPHThe following graph provides a comparison over the five-year period ended December 31, 2016 of the cumulative totalshareholder return from a $100 investment in the Company's common stock with the NASDAQ Medical Supplies Index and theNASDAQ Composite Total Return: Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16Heska Corporation$100 $163 $176 $366 $780 $981NASDAQ Medical Supplies Index$100 $118 $145 $174 $193 $228NASDAQ Composite Total Return Index$100 $116 $163 $187 $200 $220-29-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 6Selected Financial Data.The selected consolidated statements of income and consolidated balance sheets data have been derived from our consolidatedfinancial statements. The information set forth below is not necessarily indicative of the results of future operations and should be readin conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the ConsolidatedFinancial Statements and related Notes included as Items 7 and 8, respectively, in this Form 10-K. 2016 2015 2014 2013 2012 (In thousands, except per share data)Consolidated Statements of Income Data: Revenue$130,083 $104,597 $89,837 $78,339 $72,805Operating income (loss)16,533 8,557 2,911 (1,430) 2,158Income (loss) before income taxes16,504 8,427 2,950 (1,393) 2,023Net income (loss) attributable to Heska Corporation$10,508 $5,239 $2,603 $(1,196) $1,203 Earnings (loss) per share attributable to Heska Corporation: Basic earnings (loss) per share attributable to Heska Corporation$1.55 $0.80 $0.44 $(0.21) $0.23Diluted earnings (loss) per share attributable to Heska Corporation$1.43 $0.74 $0.41 $(0.21) $0.22Basic weighted-average common shares outstanding6,783 6,509 5,951 5,755 5,326Diluted weighted-average common shares outstanding7,361 7,074 6,409 5,755 5,489 Consolidated Balance Sheets Data: Total assets$130,844 $109,719 $96,844 $93,553 $66,826-30-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 7Management's Discussion and Analysis of Financial Condition and Results of Operations.The following discussion and analysis of our financial condition and results of operations should be read in conjunction with"Selected Financial Data" and the Consolidated Financial Statements and related Notes included in Items 6 and 8 of this Form 10-K.This discussion contains forward-looking statements that involve risks and uncertainties. Such statements, which include statementsconcerning future revenue sources and concentration, gross profit margins, selling and marketing expenses, research and developmentexpenses, general and administrative expenses, capital resources, additional financings or borrowings and additional losses, are subjectto risks and uncertainties, including, but not limited to, those discussed below and elsewhere in this Form 10-K, particularly in Item 1A"Risk Factors," that could cause actual results to differ materially from those projected. The forward-looking statements set forth in thisForm 10-K are as of the close of business on March 2, 2017, and we undertake no duty and do not intend to update this information,except as required by applicable securities laws.OverviewWe sell advanced veterinary diagnostic and specialty products. Our offerings include blood testing instruments and supplies,digital imaging products, software and services, vaccines, local and cloud-based data services, allergy testing and immunotherapy, andsingle-use offerings such as in-clinic diagnostic tests and heartworm preventive products. Our core focus is on supporting veterinariansin the canine and feline healthcare space.Our business consists of two reportable segments, Core Companion Animal Health ("CCA"), which represented 83% of our2016 revenue and Other Vaccines, Pharmaceuticals and Products ("OVP"), which represented 17% of our 2016 revenue.The CCA segment includes, primarily for canine and feline use, blood testing instruments and supplies, digital imagingproducts, software and services, local and cloud-based data services, allergy testing and immunotherapy, and single use offerings suchas in-clinic diagnostic tests and heartworm preventive products.Blood testing and other non-imaging instruments and supplies represented approximately 38% of our 2016 revenue. Manyproducts in this area involve placing an instrument in the field and generating future revenue from consumables, including items suchas supplies and service, as that instrument is used. Approximately 28% of our 2016 revenue resulted from the sale of such consumablesto an installed base of instruments and approximately 10% of our 2016 revenue was from hardware revenue. A loss of, or disruption in,the supply of consumables we are selling to an installed base of instruments could substantially harm our business. All of our bloodtesting and other non-imaging instruments and supplies are supplied by third parties, who typically own the product rights and supplythe product to us under marketing and/or distribution agreements. In many cases, we have collaborated with a third party to adapt ahuman instrument for veterinary use. Major products in this area include our instruments for chemistry, hematology, blood gas, andimmunodiagnostic testing and their affiliated operating consumables. Revenue from products in these three areas, including revenuesfrom consumables, represented approximately 34% of our 2016 revenue.Imaging hardware, software and services represented approximately 23% of 2016 revenue. Digital radiography is the largestproduct offering in this area, which also includes ultrasound instruments. Digital radiography solutions typically consist of acombination of hardware and software placed with a customer, often combined with an ongoing service and support contract. With ouracquisition of Cuattro Veterinary, LLC, subsequently renamed Heska Imaging International, LLC ("International Imaging"), we now sellour imaging solutions both in the United States and internationally. Our experience has been that most of the-31-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.revenue is generated at the time of sale in this area, in contrast to the blood testing category discussed above where ongoingconsumable revenue is often a larger component of economic value as a given blood testing instrument is used.Other CCA revenue, including single use diagnostic and other tests, pharmaceuticals and biologicals as well as research anddevelopment, licensing and royalty revenue, represented approximately 22% of our 2016 revenue. Since items in this area are oftensingle use by their nature, our typical aim is to build customer satisfaction and loyalty for each product, generate repeat annual salesfrom existing customers and expand our customer base in the future. Products in this area are both supplied by third parties andprovided by us. Major products and services in this area include heartworm diagnostic tests and preventives, and allergy test kits,allergy immunotherapy and testing. Combined revenue from heartworm-related products and allergy-related products represented 21%of our 2016 revenue.We consider the CCA segment to be our core business and devote most of our management time and other resources toimproving the prospects for this segment. Maintaining a continuing, reliable and economic supply of products we currently obtain fromthird parties is critical to our success in this area. Virtually all of our sales and marketing expenses occur in the CCA segment. Themajority of our research and development spending is dedicated to this segment as well.All of our CCA products are ultimately sold primarily to or through veterinarians. In many cases, veterinarians will mark uptheir costs to their customer. The acceptance of our products by veterinarians is critical to our success. CCA products are sold directly toend users by us as well as through distribution relationships, such as our agreement with Intervet Inc., d/b/a Merck Animal Health("Merck Animal Health"), the sale of kits to conduct blood testing to third-party veterinary diagnostic laboratories and independentthird-party distributors. Revenue from direct sales and distribution relationships represented approximately 61% and 39%, respectively,of CCA 2016 revenue.The OVP segment includes our 168,000 square foot USDA- and FDA-licensed production facility in Des Moines, Iowa. Weview this facility as an asset which could allow us to control our cost of goods on any pharmaceuticals and vaccines that we maycommercialize in the future. We have increased integration of this facility with our operations elsewhere. For example, virtually all ourU.S. inventory, excluding our imaging products, is now stored at this facility and related fulfillment logistics are managed there. CCAsegment products manufactured at this facility are transferred at cost and are not recorded as revenue for our OVP segment. We viewOVP reported revenue as revenue primarily to cover the overhead costs of the facility and to generate incremental cash flow to fund ourCCA segment.Our OVP segment includes private label vaccine and pharmaceutical production, primarily for cattle but also for other speciesincluding equine, porcine, avian, feline and canine. All OVP products are sold by third parties under third-party labels.Historically, a significant portion of our OVP segment's revenue has been generated from the sale of certain bovine vaccines,which have been sold primarily under the Titanium® and MasterGuard® brands. We have an agreement with Eli Lilly and Company("Eli Lilly") and its affiliates operating through Elanco for the production of these vaccines. Our OVP segment also produces vaccinesand pharmaceuticals for other third parties.Critical Accounting Policies and EstimatesOur discussion and analysis of our financial condition and results of operations is based upon the consolidated financialstatements, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation offinancial statements in conformity with GAAP requires-32-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingentassets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expense during the periods.These estimates are based on historical experience and various other assumptions that we believe to be reasonable under thecircumstances. We have identified those critical accounting policies used in reporting our financial position and results of operationsbased upon a consideration of those accounting policies that involve the most complex or subjective decisions or assessment. Weconsider the following to be our critical accounting policies.Revenue RecognitionWe generate our revenue through the sale of products, as well as through licensing of technology product rights, royalties andsponsored research and development. Our policy is to recognize revenue when the applicable revenue recognition criteria have beenmet, which generally include the following:•Persuasive evidence of an arrangement exists;•Delivery has occurred or services rendered;•Price is fixed or determinable; and•Collectability is reasonably assured.Revenue from the sale of products is recognized after both the goods are shipped to the customer and acceptance has beenreceived, if required, with an appropriate provision for estimated returns and allowances. We do not permit general returns of productssold. Certain of our products have expiration dates. Our policy is to exchange certain outdated, expired product with the same product.We record an accrual for the estimated cost of replacing the expired product expected to be returned in the future, based on ourhistorical experience, adjusted for any known factors that reasonably could be expected to change historical patterns, such as regulatoryactions which allow us to extend the shelf lives of our products. Revenue from both direct sales to veterinarians and sales toindependent third-party distributors are generally recognized when goods are shipped. Our products are shipped complete and ready touse by the customer. The terms of the customer arrangements generally pass title and risk of ownership to the customer at the time ofshipment. Certain customer arrangements provide for acceptance provisions. Revenue for these arrangements is not recognized until theacceptance has been received or the acceptance period has lapsed. We reduce our revenue by the estimated cost of any rebates,allowances or similar programs, which are used as promotional programs.Recording revenue from the sale of products involves the use of estimates and management judgment. We must make adetermination at the time of sale whether the customer has the ability to make payments in accordance with arrangements. While we doutilize past payment history, and, to the extent available for new customers, public credit information in making our assessment, thedetermination of whether collectability is reasonably assured is ultimately a judgment decision that must be made by management. Wemust also make estimates regarding our future obligation relating to returns, rebates, allowances and similar other programs.License revenue under arrangements to sell or license product rights or technology rights is recognized as obligations under theagreement are satisfied, which generally occurs over a period of time. Generally, licensing revenue is deferred and recognized over theestimated life of the related agreements, products, patents or technology. Nonrefundable licensing fees, marketing rights and milestonepayments received under contractual arrangements are deferred and recognized over the remaining contractual term using the straight-line method.-33-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Recording revenue from license arrangements involves the use of estimates. The primary estimate made by management isdetermining the useful life of the related agreement, product, patent or technology. We evaluate all of our licensing arrangements byestimating the useful life of either the product or the technology, the length of the agreement or the legal patent life and defer therevenue for recognition over the appropriate period.We may enter into arrangements that include multiple elements. Such arrangements may include agreements allowing for theusage of an instrument and a given level of consumables for one monthly payment. In these situations, we must determine whether thevarious elements meet the criteria to be accounted for as separate elements. If the elements cannot be separated, revenue is recognizedonce revenue recognition criteria for the entire arrangement have been met or over the period that the Company's obligations to thecustomer are fulfilled, as appropriate. If the elements are determined to be separable, the revenue is allocated to the separate elementsbased on relative fair value and recognized separately for each element when the applicable revenue recognition criteria have been met.In accounting for these multiple element arrangements, we must make determinations about whether elements can be accounted forseparately and make estimates regarding their relative fair values.Allowance for Doubtful AccountsWe maintain an allowance for doubtful accounts receivable based on client-specific allowances, as well as a general allowance.Specific allowances are maintained for clients which are determined to have a high degree of collectability risk based on such factors,among others, as: (i) the aging of the accounts receivable balance; (ii) the client's past payment history; (iii) a deterioration in the client'sfinancial condition, evidenced by weak financial condition and/or continued poor operating results, reduced credit ratings, and/or abankruptcy filing. In addition to the specific allowance, the Company maintains a general allowance for credit risk in its accountsreceivable which is not covered by a specific allowance. The general allowance is established based on such factors, among others, as:(i) the total balance of the outstanding accounts receivable, including considerations of the aging categories of those accountsreceivable; (ii) past history of uncollectable accounts receivable write-offs; and (iii) the overall creditworthiness of the client base. Aconsiderable amount of judgment is required in assessing the realizability of accounts receivable. Should any of the factors consideredin determining the adequacy of the overall allowance change, an adjustment to the provision for doubtful accounts receivable may benecessary.InventoriesInventories are stated at the lower of cost or net realizable value, cost being determined on the first-in, first-out method.Inventories are written down if the estimated net realizable value of an inventory item is less than its recorded value. We review thecarrying cost of our inventories by product each quarter to determine the adequacy of our reserves for excess/obsolete inventory. Inaccounting for inventories we must make estimates regarding the estimated net realizable value of our inventory. This estimate is based,in part, on our forecasts of future sales and shelf life of products.-34-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Deferred Tax Assets – Valuation AllowanceA portion of our deferred tax assets, specifically our domestic federal net operating loss carryforwards ("NOL"), are reduced bya valuation allowance based on an assessment of available evidence if we are unable to conclude that it is more likely than not thatsome or all of the related deferred tax assets will be realized. If we are able to conclude it is more likely than not that we will realize afuture benefit from a deferred tax asset against which we previously recorded a valuation allowance, we will reduce the relatedvaluation allowance by an amount equal to the estimated quantity of income taxes we would pay in cash if we were not to utilize thedeferred tax asset in the future. The first time this occurs in a given jurisdiction, it will result in an increase in the net deferred tax asseton our consolidated balance sheets and an income tax benefit of equal magnitude in our statement of operations in the period we makethe determination. In future periods, we will then recognize as income tax expense the estimated amount of income taxes we wouldhave paid in cash had we not utilized the related deferred tax asset. The corresponding journal entry will be a reduction of our deferredtax asset.Results of OperationsOur analysis presented below is organized to provide the information we believe will facilitate an understanding of our historicalperformance and relevant trends going forward. Our results of operations include the results of International Imaging for the period ofJune 1, 2016 through December 31, 2016. This discussion should be read in conjunction with our consolidated financial statements,including the notes thereto, in Item 8 of this annual report on Form 10K.The following table sets forth, for the periods indicated, certain data derived from our consolidated statements of income (inthousands): Years Ended December 31, 2016 2015 2014Revenue$130,083 $104,597 $89,837Gross Profit53,892 44,213 35,715Operating expenses37,359 35,656 32,804Operating income16,533 8,557 2,911Interest and other expense (income), net29 130 (39)Income before income taxes16,504 8,427 2,950Provision for income taxes4,339 2,908 1,351Net income12,165 5,519 1,599Net income (loss) attributable to non-controlling interest1,657 280 (1,004)Net income attributable to Heska Corporation$10,508 $5,239 $2,603-35-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The following table sets forth, for the periods indicated, the percentage of sales represented by certain items reflected in ourconsolidated statements of income: Years Ended December 31, 2016 2015 2014Revenue100.0% 100.0% 100.0 %Gross Profit41.4% 42.3% 39.8 %Operating expenses28.7% 34.1% 36.5 %Operating income12.7% 8.2% 3.2 %Interest and other expense (income), net—% 0.1% — %Income before income taxes12.7% 8.1% 3.3 %Provision for income taxes3.3% 2.8% 1.5 %Net income9.4% 5.3% 1.8 %Net income (loss) attributable to non-controlling interest1.3% 0.3% (1.1)%Net income attributable to Heska Corporation8.1% 5.0% 2.9 %RevenueTotal revenue increased 24% to $130.1 million in 2016 compared to $104.6 million in 2015. Total revenue increased 16% to$104.6 million in 2015 compared to $89.8 million in 2014.CCA segment revenue increased 27% to $107.4 million in 2016 compared to $84.2 million in 2015. The increase was drivenprimarily by greater sales of our digital imaging products, including those of newly-acquired International Imaging, increased sales ofour heartworm preventive products and increased sales of our instruments and their associated consumables. These increases werepartially offset by declines in sales of our heartworm diagnostic tests and allergy testing and treatments. CCA segment revenueincreased 16% to $84.2 million in 2015 compared to $72.4 million in 2014. The increase was driven primarily by greater sales of ourinstruments and their associated consumables, partially offset by a decline in sales of our heartworm diagnostic tests.OVP segment revenue increased 11% to $22.7 million in 2016 compared to $20.3 million in 2015 and increased 16% to $20.3million in 2015 compared to $17.5 million in 2014. The increase in both periods presented was driven primarily by greater revenuefrom our contract with Elanco.Gross ProfitGross profit increased 22% to $53.9 million in 2016 compared to $44.2 million in 2015. Gross margin percent, which wederive by dividing gross profit by total revenue, decreased to 41.4% in 2016 compared to 42.3% in 2015. This lower gross marginpercentage was driven primarily by unfavorable product mix in our OVP segment as well as incremental sales from InternationalImaging, which contributes slightly lower gross margins than our domestic imaging products.Gross profit increased 24% to $44.2 million in 2015 compared to $35.7 million in 2014. Gross margin percent increased to42.3% in 2015 compared to 39.8% in 2014. The lower gross margin percentage was driven primarily by unfavorable product mix inour OVP segment.-36-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Operating ExpensesSelling and marketing expenses increased 4% to $22.1 million in 2016 compared to $21.3 million in 2015 and increased 11%to $21.3 million in 2015 compared to $19.2 million in 2014. The increase in both periods was driven primarily by commissions paid onhigher sales levels, particularly on our digital radiography sales and instrument placements.Research and development expenses increased 29% to $2.1 million in 2016, compared to $1.7 million in 2015 and increased17% to $1.7 million in 2015, as compared to $1.4 million in 2014. The increase in both periods was driven primarily by spending onproduct development for digital radiography solutions.General and administrative expenses increased 4% to $13.1 million in 2016, compared to $12.7 million in 2015. The increasewas driven primarily by intangible amortization expense related to our acquisition of International Imaging. General and administrativeexpenses increased 3% to $12.7 million in 2015, as compared to $12.2 million in 2014. The increase was driven primarily by a one-time $0.9 million charge that was incurred in the third quarter of 2015 for certain accelerated restricted stock vesting and paymentsrelated to the early termination of our Executive Chair's employment agreement.Interest and Other Expense (Income), NetInterest and other expense (income), net, was an expense of $29 thousand in 2016, as compared to an expense of $130thousand in 2015 and income of $39 thousand in 2014.The decrease in expense in 2016 as compared to 2015 was driven primarily by income received from the sale of an equityinvestment during the first quarter of 2016. This income was offset by minimum interest payments made on our line of credit andgreater foreign currency losses.The increase in expense from 2014 to 2015 was driven primarily by greater foreign currency losses.Income Tax ExpenseIn 2016, we had total income tax expense of $4.3 million, including $3.9 million in domestic deferred income tax expense, anon-cash item primarily related to our domestic NOL position, and $0.4 million in current income tax expense. In 2015, we had totalincome tax expense of $2.9 million, including $1.3 million in domestic deferred income tax expense, a non-cash item primarily relatedto our domestic NOL position, and $1.6 million in current income tax expense. In 2014, we had total income tax expense of $1.4million, including $1.3 million in domestic deferred income tax expense, and $47 thousand in current income tax expense. Greaterincome before income taxes was a key factor in our increasing tax expense from year to year. The impact of greater income beforeincome taxes in 2016 was somewhat offset by additional tax benefits of $0.8 million related to employee share-based payment awardswhich are now recorded as income tax benefit or expense in earnings effective with ASU 2016-09, which we adopted in the secondquarter of 2016.Net Income attributable to Heska CorporationNet income attributable to Heska Corporation was $10.5 million in 2016, as compared to a net income attributable to HeskaCorporation of $5.2 million in 2015 and net income attributable to Heska Corporation of $2.6 million in 2014. The difference betweenthis line item and "Net Income (Loss)" is the net income or loss attributable to our minority interest in Heska Imaging, which was netincome of $1.7 million in 2016, net income of $0.3 million in 2015 and net loss of $1.0 million in 2014.-37-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Impact of InflationIn recent years, inflation has not had a significant impact on our operations.Liquidity, Capital Resources and Financial ConditionWe believe that adequate liquidity and cash generation is important to the execution of our strategic initiatives. Our ability tofund our operations, acquisitions, capital expenditures, and product development efforts may depend on our ability to generate cashfrom operating activities which is subject to future operating performance, as well as general economic, financial, competitive,legislative, regulatory, and other conditions, some of which are beyond our control. Our primary sources of liquidity are our availablecash, cash generated from current operations and availability under our credit facilities noted below.For the year ended December 31, 2016, we had net income of $12.2 million and net cash provided by operations of $5.9million. At December 31, 2016, we had $10.8 million of cash and cash equivalents, working capital of $22.9 million and $0.7 millionoutstanding borrowings under our revolving line of credit, discussed below.At December 31, 2016, we had a $15.0 million asset-based revolving line of credit with Wells Fargo which has a maturity dateof December 31, 2017 as part of our credit and security agreement with Wells Fargo. At December 31, 2016, we had $0.7 million ofborrowings outstanding on this line of credit. Our ability to borrow under this line of credit varies based upon available cash, eligibleaccounts receivable and eligible inventory. On December 31, 2016, any interest on borrowings due was to be charged at a stated rate ofthree month LIBOR plus 2.25% and payable monthly. We are required to comply with various financial and non-financial covenants,and we have made various representations and warranties under our agreement with Wells Fargo. A key financial covenant is based ona fixed charge coverage ratio, as defined in our agreement with Wells Fargo. Failure to comply with any of the covenants,representations or warranties could result in our being in default on the loan and could cause all outstanding amounts payable to WellsFargo to become immediately due and payable or impact our ability to borrow under the agreement. We were in compliance with allfinancial covenants as of December 31, 2016 and our available borrowing capacity based upon eligible accounts receivable and eligibleinventory under our revolving line of credit was approximately $12.9 million.A summary of our cash provided by and used in operating, investing and financing activities is as follows (in thousands): Years Ended December 31, 2016 2015 2014Net cash provided by operating activities$5,855 $2,125 $5,554Net cash used in investing activities(3,302) (3,773) (2,331)Net cash provided by (used in) financing activities1,403 2,726 (3,271)Effect of currency translation on cash(52) (43) (113)Increase (decrease) in cash and cash equivalents3,904 1,035 (161)Cash and cash equivalents, beginning of the period6,890 5,855 6,016Cash and cash equivalents, end of the period$10,794 $6,890 $5,855Net cash provided by operating activities was $5.9 million in 2016 as compared to net cash provided by operating activities of$2.1 million in 2015, a favorable increase of approximately $3.7 million. The change was driven primarily by a $6.6 million increase innet income, a $2.6 million increase in the use of our deferred tax asset, a $2.5 million favorable decrease in cash used for inventory,some of which related to-38-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.inventory transferred to property, plant and equipment as rental units, a $1.0 million increase in cash provided by accrued liabilities andother non-current assets and a $0.5 million increase in depreciation and amortization. These factors were partially offset by a $5.5million increase in cash used in deferred revenue and other non-current assets and a $3.7 million unfavorable increase in cash used foraccounts payable. Net cash provided by operating activities was $2.1 million in 2015 as compared to net cash provided by operatingactivities of $5.6 million in 2014, an unfavorable decrease of approximately $3.4 million. The change was driven primarily by a $3.7million increase in cash used for accounts receivable, a $2.3 million increase in cash used for deferred revenue and other long termliabilities, which included a $3.0 million milestone payment received in 2014 but not 2015, a $2.2 million increase in cash used in othernon-current assets, which included the impact of increased capital lease activity under new marketing programs, and a $1.6 millionincrease in cash used for inventory in 2015, some of which related to inventory transferred to property, plant and equipment as rentalunits. These factors were somewhat offset by a $3.9 million increase in net income and a $2.2 million increase in cash provided byaccounts payable.Net cash used in investing activities was $3.3 million in 2016 as compared to net cash used in investing activities of $3.8million in 2015, a favorable decrease of approximately $0.5 million. The change was driven primarily by a $0.4 million favorabledecrease in purchases of property and equipment and $0.1 million of proceeds from the sale of an equity investment. Net cash used ininvesting activities was $3.8 million in 2015 as compared to net cash used in investing activities of $2.3 million in 2014, an unfavorableincrease of approximately $1.4 million. The change was driven primarily by an increase in purchases of property and equipment.Net cash provided by financing activities was $1.4 million in 2016 as compared to net cash provided by financing activities of$2.7 million in 2015, an unfavorable decrease of approximately $1.3 million. The change was driven primarily by a $1.5 millionchange related to the accounting for additional tax benefits for employee share-based payment awards, which in 2016 were recorded asincome tax benefit in earnings as compared to 2015, when they were carried on the balance sheet and classified as part of cashprovided by financing activities. Net cash provided by financing activities was $2.7 million in 2015 as compared to net cash used infinancing activities of $3.3 million in 2014, a favorable change of approximately $6.0 million. The change was driven primarily by useof our revolving line of credit, from which we borrowed $0.1 million in 2015 as compared to repaying $4.8 million in 2014.Under the Amended and Restated Operating Agreement of US Imaging (the "Operating Agreement"), should US Imaging meetcertain performance criteria, the Imaging Minority has been granted a put option to sell us all of the Imaging Minority's position in USImaging following the audit of our financial statements for 2016. Required performance criteria have been met and we have been givennotice that the put option is being exercised. We have 90 days from the receipt of notice to deliver payment (any applicable payment inaggregate to be defined as the "Put Payment") for the Imaging Minority’s position, and we consider notice to have been receivedimmediately prior to the filing of this Form 10-K with the SEC. We plan to deliver the Put Payment and obtain the Imaging Minority’sposition in US Imaging on May 31, 2017. Based on US Imaging’s 2016 financial performance, the Put Payment is to be for a value of$13.8 million if we deliver all cash or up to $14.6 million if we deliver a combination of cash and the maximum contractually allowablevalue of stock. While we have the right to deliver up to 55% of the consideration in our Public Common Stock under certaincircumstances, such stock is to be valued based on 90% of market value (the "Delivery Stock Value") and is limited to approximately650 thousand shares in any case. If the Delivery Stock Value per share is less than the market value per share of our Public CommonStock at the time of the Acquisition, we do not have the right to deliver any Public Common Stock as consideration. While we havereported the Put Payment at $14.6 million for financial reporting purposes, which contemplates our delivery of 55% of the Put Paymentconsideration in Public Common Stock, no final decision by our Board of Directors as to the relative use of cash and stock has beenmade and we may not be able to deliver any stock based on the-39-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Delivery Stock Value at the time of closing, as discussed above. The estimated Put Payment value of $14.6 million is listed as"Obligation to purchase minority interest" on the Company's consolidated balance sheets as of December 31, 2016.At December 31, 2016, US Imaging had a $1.6 million note receivable, including accrued interest, from International Imaging,which is due on June 15, 2019 and which eliminates in consolidation of the Company's financial statements. This note was previouslylisted as "Note receivable – related party" on the Company's consolidated balance sheets and the note receivable was assumed as part ofthe Company's acquisition of International Imaging.At December 31, 2016, Heska Corporation had accounts receivable from US Imaging of $5.6 million, including accruedinterest, which eliminates in consolidation of the Company's financial statements; US Imaging had a net receivable due from Cuattro,LLC of $0.1 million, which is included in "Due from – related parties" on the Company's consolidated balance sheets; Global Imaginghad net prepaid receivables from US Imaging of $1.2 million which eliminates in consolidation of the Company's financial statements;and all monies owed accrue interest at the same interest rate Heska Corporation pays under its credit and security agreement with WellsFargo once past due with the exception of the note receivable, which accrues at this rate to its maturity date.At December 31, 2016, we had other borrowings outstanding totaling $78 thousand, all of which were obligations of a USImaging loan from De Lage Landen Financial Services, Inc. ("DLL"). The note bears an interest rate of 6% and is due in equal monthlypayments, including principal and interest, of $13 thousand through June 2017. The note may be prepaid prior to maturity, but issubject to a surcharge in such a circumstance. The principal associated with this note of approximately $78 thousand is listed as "othershort term borrowings" on our consolidated balance sheets as it is due within a year.Our financial plan for 2017 indicates that our available cash and cash equivalents, together with cash from operations andborrowings expected to be available under our revolving line of credit, will be sufficient to fund our operations for the foreseeablefuture as well as finance the purchase of the Imaging Minority as described above. Additionally, we would consider additionalacquisitions if we felt they were consistent with our strategic direction. However, our actual results may differ from this plan, and wemay be required to consider alternative strategies. We may be required to raise additional capital in the future. If necessary, we expectto raise these additional funds through the increased sale of customer leases, the sale of equity securities or the issuance of new termdebt. There is no guarantee that additional capital will be available from these sources on acceptable terms, if at all, and certain of thesesources may require approval by existing lenders. See "Risk Factors" in Item 1A of this Form 10-K for a discussion of some of thefactors that affect our capital raising alternatives.Effect of currency translation on cashNet effect of foreign currency translations on cash changed $9 thousand to a $52 thousand negative impact in 2016 ascompared to a $43 thousand negative impact in 2015. The net effect of foreign currency translation on cash changed $70 thousand to a$43 thousand negative impact in 2015 from a $113 thousand negative impact in 2014. These effects are related to changes in exchangerates between the US Dollar and the Swiss Franc, which is the functional currency of our Swiss subsidiary.Off Balance Sheet ArrangementsWe have no off balance sheet arrangements or variable interest entities.Contractual Obligations-40-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The following table sets forth our future payments due under contractual obligations as of December 31, 2016 (in thousands): Total Less Than 1Year 1 - 3 Years 4 - 5 Years After 5 YearsOperating leases$12,445 $2,090 $3,780 $3,373 $3,202Obligation to purchase minority interest6,245 6,245 — — —Unconditional purchase obligations976 638 338 — —Long-term debt78 78 — — —Line of credit672 672 — — —Interest payments on debt86 86 — — —Total$20,502 $9,809 $4,118 $3,373 $3,202In addition to those agreements considered above where our contractual obligation is fixed, we are party to commercialagreements which may require us to make milestone payments under certain circumstances. Any milestone obligations which webelieve are likely to be triggered but are not yet paid are included in "Unconditional Purchase Obligations" in the table above. We donot believe other potential milestone obligations, some of which we consider to be of remote likelihood of ever being triggered, willhave a material impact on our liquidity, capital resources or financial condition in the foreseeable future.The line item entitled "Obligation to purchase minority interest" indicates our estimate of the cash portion that may be used tosettle the purchase of the minority interest in US Imaging under a series of performance-based puts as described above.Net Operating Loss Carryforwards As of December 31, 2016, we had a net domestic operating loss carryforward, or NOL, of approximately $96.0 million, adomestic alternative minimum tax credit carryforward of approximately $0.5 million and a domestic research and development taxcredit carryforward of approximately $0.4 million for federal income tax purposes. Our federal NOL is expected to expire as follows ifunused: $90.0 million in 2018 through 2022, $5.5 million in 2024 and 2025 and $0.5 million in 2027 and later. The NOL and tax creditcarryforwards are subject to alternative minimum tax limitations and to examination by the tax authorities. In addition, we had a"change of ownership" as defined under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended (an"Ownership Change"). We believe the latest Ownership Change occurred at the time of our initial public offering in July 1997.Recent Accounting PronouncementsFrom time to time, the Financial Accounting Standards Board ("FASB") or other standards setting bodies issue new accountingpronouncements. Updates to the FASB Accounting Standards Codification ("ASC") are communicated through issuance of anAccounting Standards Update ("ASU"). Unless otherwise discussed, we believe that the impact of recently issued guidance, whetheradopted or to be adopted in the future, is not expected to have a material impact on our Consolidated Financial Statements uponadoption.To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the informationprovided in Note 1- Operations and Summary of Significant Accounting Policies to our Consolidated Financial Statements included inItem 8 of this Form 10-K.-41-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 7A.Quantitative and Qualitative Disclosures about Market Risk.Market risk represents the risk of loss that may impact the financial position, results of operations or cash flows due to adversechanges in financial and commodity market prices and rates. We are exposed to market risk in the areas of changes in United States andforeign interest rates and changes in foreign currency exchange rates as measured against the United States dollar. These exposures aredirectly related to our normal operating and funding activities.Interest Rate RiskAt December 31, 2016, there was approximately $0.7 million outstanding on our line of credit with Wells Fargo. We also hadapproximately $10.8 million of cash and cash equivalents at December 31, 2016, the majority of which was invested in liquid interestbearing accounts. We had no interest rate hedge transactions in place on December 31, 2016. We completed an interest rate risksensitivity analysis based on the above and an assumed one-percentage point decrease in interest rates would have an approximate$101 thousand negative impact on our pre-tax earnings based on our outstanding balances as of December 31, 2016.Foreign Currency RiskOur investment in foreign assets consists primarily of our investment in our Swiss subsidiary. Foreign currency risk may impactour results of operations. In cases where we purchase inventory in one currency and sell corresponding products in another, our grossmargin percentage is typically at risk based on foreign currency exchange rates. In addition, in cases where we may be generatingoperating income in foreign currencies, the magnitude of such operating income when translated into U.S. dollars will be at risk basedon foreign currency exchange rates. Our agreements with suppliers and customers vary significantly in regard to the existence andextent of currency adjustment and other currency risk sharing provisions. We had no foreign currency hedge transactions in place onDecember 31, 2016.We have a wholly-owned subsidiary in Switzerland which uses the Swiss Franc as its functional currency. We purchaseinventory in foreign currencies, primarily Euros, and sell corresponding products in U.S. dollars. We also sell products in foreigncurrencies, primarily Euros and Japanese Yen, where our inventory costs are largely in U.S. dollars. We also have entered into contractsfor which payments are adjusted for changes in foreign currency rates, including the Chinese Yuan. Based on our 2016 results ofoperations, currency holdings and currency-related prepaid accounts, accounts receivable and accounts payable (all of which, includingcurrency holdings, we will refer to as "Currency Accounts") as of December 31, 2016 and the functional currency of the accountingentity where such Currency Accounts are held, the expected impact on our consolidated statements of income, if foreign currencyexchange rates were to strengthen/weaken by 25% against the dollar, would be a resulting gain/loss in operating income ofapproximately $400 thousand and a currency loss/gain of $393 thousand, if all other currencies were to strengthen/weaken by 25%against the Swiss Franc, would be a resulting loss/gain in operating income of approximately $35 thousand and a currency gain/loss of$415 thousand, if all other currencies were to strengthen/weaken by 25% against the Euro, would be a resulting loss/gain in operatingincome of approximately $313 thousand and a currency loss/gain of $801 thousand, and if all other currencies were tostrengthen/weaken by 25% against the Yuan, the resulting loss/gain in operating income would be approximately $649 thousand, butno resulting currency loss/gain.-42-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 8.Financial Statements and Supplementary Data.HESKA CORPORATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm44Consolidated Balance Sheets45Consolidated Statements of Income46Consolidated Statements of Comprehensive Income47Consolidated Statements of Stockholders' Equity48Consolidated Statements of Cash Flows49Notes to Consolidated Financial Statements50-43-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and StockholdersHeska Corporation and SubsidiariesLoveland, ColoradoWe have audited the accompanying consolidated balance sheets of Heska Corporation and Subsidiaries (the “Company”) as of December 31, 2016 and 2015,and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year periodended December 31, 2016. We also have audited the Company’s internal control over financial reporting as of December 31, 2016, based on criteriaestablished in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for itsassessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control overFinancial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal controlover financial reporting based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effectiveinternal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made bymanagement, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design andoperating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessaryin the circumstances. We believe that our audits provide a reasonable basis for our opinions.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company arebeing made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Heska Corporation andSubsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three-year period endedDecember 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Companymaintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in InternalControl-Integrated Framework (1992) issued by COSO.EKS&H LLLPMarch 3, 2017Denver, Colorado-44-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(in thousands, except per share amounts) December 31, 2016 2015ASSETSCurrent assets: Cash and cash equivalents $10,794 $6,890Accounts receivable, net of allowance for doubtful accounts of$237 and $189, respectively 20,857 15,935Due from – related parties 100 308Inventories, net 20,395 16,101Other current assets 3,127 2,028Total current assets 55,273 41,262Property and equipment, net 16,581 17,020Note receivable – related party — 1,516Goodwill 26,647 20,910Other intangible assets, net 2,346 56Deferred tax asset, net 21,122 25,883Other long-term assets 8,875 3,072Total assets $130,844 $109,719 LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $7,154 $7,624Accrued liabilities 6,469 5,416Current portion of deferred revenue 3,439 5,461Obligation to purchase minority interest 14,602 —Line of credit 672 143Other short-term borrowings, including current portion oflong-term note payable 78 159Total current liabilities 32,414 18,803Long-term note payable, net of current portion — 69Deferred revenue, net of current portion, and other 11,455 11,572Total liabilities 43,869 30,444Commitments and contingencies (Note 10) Non-Controlling Interest — 15,747Stockholders' equity: Preferred stock, $.01 par value, 2,500,000 shares authorized,none issued or outstanding — —Common stock, $.01 par value, 9,000,000 shares authorized,none issued or outstanding — —Public common stock, $.01 par value, 9,000,000 shares authorized,7,026,051 and 6,625,287 shares issued and outstanding, respectively 70 66Additional paid-in capital 238,635 227,267Accumulated other comprehensive income 97 187Accumulated deficit (151,827) (163,992)Total stockholders' equity 86,975 63,528Total liability and stockholders' equity $130,844 $109,719See accompanying notes to consolidated financial statements.-45-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(in thousands, except per share amounts) Year Ended December 31, 2016 2015 2014Revenue: Core companion animal health $107,398 $84,249 $72,354Other vaccines, pharmaceuticals and products 22,685 20,348 17,483Total revenue, net 130,083 104,597 89,837 Cost of revenue 76,191 60,384 54,122 Gross profit 53,892 44,213 35,715 Operating expenses: Selling and marketing 22,092 21,339 19,159Research and development 2,147 1,658 1,414General and administrative 13,120 12,659 12,231Total operating expenses 37,35935,65632,804Operating income 16,533 8,557 2,911Interest and other expense (income), net 29 130 (39)Income before income taxes 16,504 8,427 2,950Income tax expense: Current income tax expense 407 1,581 47Deferred income tax expense 3,932 1,327 1,304Total income tax expense 4,3392,9081,351 Net income 12,165 5,519 1,599Net income (loss) attributable to non-controlling interest 1,657 280 (1,004)Net income attributable to Heska Corporation $10,508 $5,239 $2,603 Basic earnings per share attributableto Heska Corporation $1.55 $0.80 $0.44Diluted earnings per share attributableto Heska Corporation $1.43 $0.74 $0.41 Weighted average outstanding shares used to compute basic earnings per share attributable to HeskaCorporation 6,783 6,509 5,951Weighted average outstanding shares used to compute diluted earnings per share attributable toHeska Corporation 7,361 7,074 6,409 See accompanying notes to consolidated financial statements.-46-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(in thousands) Year Ended December 31, 2016 2015 2014 Net income $12,165 $5,519 $1,599Other comprehensive income (expense): Minimum pension liability 75 (129) —Sale of equity investment (90) 44 3Foreign currency translation (75) (11) (300)Comprehensive income 12,0755,4231,302 Comprehensive income (loss) attributable to non-controlling interest 1,657 280 (1,004)Comprehensive income attributable to Heska Corporation $10,418$5,143$2,306 See accompanying notes to consolidated financial statements.-47-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(in thousands) Common Stock AdditionalPaid-inCapital AccumulatedOtherComprehensiveIncome AccumulatedDeficit TotalStockholders'Equity Shares Amount Balances January 1, 2014 5,846 $58 $217,588 $580 $(171,110) $47,116Net loss — — — — 1,599 1,599Issuance of common stock related to options, ESPPand other 496 5 1,443 — — 1,448Recognition of stock based compensation — — 1,653 — — 1,653Excess tax benefit from stock-based compensation — — 228 — — 228Stock issued for Heska Imaging — — 3,405 — — 3,405Stock issued for Heska Imaging Mark to Market — — (2,020) — — (2,020)Unrealized gain on available for sale investments — — — 3 — 3Foreign currency translation adjustments — — — (300) — (300)Balances, December 31, 2014 6,342 $63 $222,297 $283 $(169,511) $53,132Net income — — — — 5,519 5,519Issuance of common stock related to options, ESPPand other 283 3 1,255 — — 1,258Recognition of stock based compensation — — 2,269 — — 2,269Excess tax benefit from stock-based compensation — — 1,514 — — 1,514Unrealized gain on available for sale investments — — — 44 — 44Foreign currency translation adjustments — — — (11) — (11)Balances, December 31, 2015 6,625 $66 $227,267 $187 $(163,992) $63,528Net income — — — — 12,165 12,165Issuance of common stock related to the acquisitionof Cuattro Veterinary International, LLC 175 2 6,347 — — 6,349Issuance of common stock related to options, ESPPand other 226 2 1,616 — — 1,618Recognition of stock based compensation — — 2,260 — — 2,260Accretion of non-controlling interest — — 1,145 — — 1,145Minimum pension liability adjustments — — — 75 — 75Sale of equity investment — — — (90) — (90)Foreign currency translation adjustments — — — (75) — (75)Balances, December 31, 2016 7,026 $70 $238,635 $97 $(151,827) $86,975 See accompanying notes to consolidated financial statements. -48-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Year Ended December 31, 2016 2015 2014CASH FLOWS FROM OPERATING ACTIVITIES: Net income $12,165 $5,519 $1,599Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 4,645 4,187 3,712Deferred tax expense 3,932 1,327 1,304Stock based compensation 2,260 2,269 1,653Unrealized (gain) loss on foreign currency translation (3) 36 (81)Changes in operating assets and liabilities: Accounts receivable (4,700) (4,216) (510)Inventories (4,731) (7,240) (5,592)Other current assets 88 (238) (73)Accounts payable (688) 3,059 900Accrued liabilities and other 1,005 43 814Other non-current assets (5,818) (2,430) (263)Deferred revenue and other (2,300) (191) 2,091Net cash provided by operating activities 5,855 2,125 5,554CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of equity investment 115 — —Purchases of property and equipment (3,417) (3,773) (2,337)Proceeds from disposition of property and equipment — — 6Net cash used in investing activities (3,302) (3,773) (2,331)CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock, net of distributions 1,620 1,258 1,430Proceeds from (repayments of) line of credit borrowings, net 530 95 (4,751)Repayments of other debt (747) (141) (178) Excess tax benefit from stock-based compensation — 1,514 228Net cash provided by (used in) financing activities 1,403 2,726 (3,271)EFFECT OF EXCHANGE RATE CHANGES ON CASH (52) (43) (113)INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,904 1,035 (161)CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 6,890 5,855 6,016CASH AND CASH EQUIVALENTS, END OF YEAR $10,794 $6,890 $5,855NON-CASH TRANSACTIONS: Common stock issued as partial consideration of acquisition of Cuattro Veterinary International, LLC $6,349 $— $—See accompanying notes to consolidated financial statements.-49-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESHeska Corporation and its wholly-owned and majority-owned subsidiaries ("Heska", the "Company", "we" or "our") selladvanced veterinary diagnostic and specialty products. Our offerings include blood testing instruments and supplies, digital imagingproducts, software and services, vaccines, local and cloud-based data services, allergy testing and immunotherapy, and single-useofferings such as in-clinic diagnostic tests and heartworm preventive products. Our core focus is on supporting veterinarians in thecanine and feline healthcare space.Basis of PresentationOur consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries and majority-owned subsidiaries since their respective dates of acquisitions. All intercompany accounts and transactions have been eliminated inconsolidation. Where our ownership of a subsidiary is less than 100%, the non-controlling interest is reported on our consolidatedbalance sheets. The non-controlling interest in our consolidated net income is reported as "Net income (loss) attributable to non-controlling interest" on our consolidated statements of income. Our consolidated financial statements are stated in United States dollarsand have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP").Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from thoseestimates. Significant estimates are required when establishing the allowance for doubtful accounts and the provision for excess orobsolete inventory, in determining the period over which our obligations are fulfilled under agreements to license product rights and/ortechnology rights, evaluating long-lived and intangible assets for impairment, determining the allocation of purchase price underpurchase accounting, estimating the expense associated with the granting of stock options, determining the value of our non-controllinginterest and in determining the need for, and the amount of, a valuation allowance on deferred tax assets.Concentration of Credit RiskFinancial instruments that potentially subject us to a concentration of credit risk consist of cash and cash equivalents andaccounts receivable. We maintain the majority of our cash and cash equivalents with financial institutions that management believes arecreditworthy in the form of demand deposits. We have no significant off-balance-sheet concentrations of credit risk such as foreignexchange contracts, options contracts or other foreign currency hedging arrangements. Our accounts receivable balances are duelargely from distribution partners, domestic veterinary clinics and individual veterinarians and other animal health companies.Henry Schein represented 16% of our consolidated accounts receivable at December 31, 2016. Merck entities representedapproximately 11% and 13% of our consolidated accounts receivable at December 31, 2016 and 2015, respectively. Eli Lilly entities,including Elanco, represented approximately 15% and 20% of our consolidated accounts receivable at December 31, 2016 and 2015,respectively. No other customer accounted for more than 10% of our consolidated accounts receivable at December 31, 2016 or 2015.-50-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)We have established an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers,historical trends, and other information.Accounts Receivable and Allowance for Doubtful AccountsAccounts receivable are recorded at net realizable value. From time to time, our customers are unable to meet their paymentobligations. We continuously monitor our customers' credit worthiness and use our judgment in establishing a provision for estimatedcredit losses based upon our historical experience and any specific customer collection issues that we have identified. While such creditlosses have historically been within our expectations and the provisions established, there is no assurance that we will continue toexperience the same credit loss rates that we have in the past. A significant change in the liquidity or financial position of our customerscould have a material adverse impact on the collectability of accounts receivable and our future operating results.Changes in allowance for doubtful accounts are summarized as follows (in thousands): Years Ended December 31, 2016 2015 2014Balances at beginning of period$189 $216 $209Additions - charged to expense163 83 143Deductions - write offs, net of recoveries(115) (110) (136)Balances at end of period$237 $189 $216Cash and Cash EquivalentsCash and cash equivalents are stated at cost, which approximates market value, and include short-term, highly liquidinvestments with original maturities of less than three months. We valued our Euro and Japanese Yen cash accounts at the spot marketforeign exchange rate as of each balance sheet date, with changes due to foreign exchange fluctuations recorded in current earnings.We held 2,778,614 and 1,779,910 Euros at December 31, 2016 and 2015, respectively. We held 1,252,221 and 1,252,221 Yen atDecember 31, 2016 and 2015, respectively. We held 172,743 and 127,507 Swiss Francs at December 31, 2016 and 2015, respectively.We held 26,477 and 26,477 Canadian Dollars at December 31, 2016 and 2015, respectively. The majority of our cash and cashequivalents are held at U.S.-based or Swiss-based financial institutions in accounts not insured by governmental entities.Fair Value of Financial InstrumentsOur financial instruments consist of cash and cash equivalents, short-term trade receivables and payables and the Company'srevolving line of credit. The carrying values of cash and cash equivalents and short-term trade receivables and payables approximatefair value because of the short-term nature of the instruments. The fair value of our line of credit balance is estimated based on currentrates available for similar debt with similar maturities and collateral, and at December 31, 2016 and 2015, approximates the carryingvalue due primarily to the floating rate of interest on such debt instruments.InventoriesInventories are stated at the lower of cost or net realizable value using the first-in, first-out method. Inventory we manufactureincludes the cost of material, labor and overhead. If the cost of inventories exceeds estimated net realizable value, provisions are madeto reduce the carrying value to estimated net realizable value.-51-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)Inventories, net consist of the following (in thousands): December 31, 2016 2015Raw materials $10,807 $8,531Work in process 3,820 2,839Finished goods 7,087 6,122Allowance for excess or obsolete inventory (1,319) (1,391) $20,395 $16,101Property and EquipmentProperty and equipment is stated at cost, net of accumulated depreciation. The costs of additions and improvements arecapitalized, while maintenance and repairs are charged to expense as incurred. When an item is sold or retired, the cost and relatedaccumulated depreciation is relieved, and the resulting gain or loss, if any, is recognized in the consolidated statements of income. Weprovide for depreciation primarily using the straight-line method by charges to income in amounts that allocate the cost of property andequipment over their estimated useful lives as follows:Asset ClassificationEstimatedUseful LifeBuilding10 to 20 yearsMachinery and equipment3 to 15 yearsLeasehold and building improvements7 to 15 yearsWe capitalize certain costs incurred in connection with developing or obtaining software designated for internal use based onthree distinct stages of development. Qualifying costs incurred during the application development stage, which consist primarily ofinternal payroll and direct fringe benefits and external direct project costs, including labor and travel, are capitalized and amortized on astraight-line basis over the estimated useful life of the asset. Costs incurred during the preliminary project and post and post-implementation and operation phases are expensed as incurred. These costs are general and administrative in nature and relatedprimarily to the determination of performance requirements, data conversion and training.Goodwill, Intangible and Other Long-Lived AssetsWe assess goodwill for impairment annually, at the reporting unit level, in the fourth quarter and whenever events orcircumstances indicate impairment may exist. In evaluating goodwill for impairment, we have the option to first assess the qualitativefactors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basisfor determining whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is definedas having a likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, we determine that is morelikely than not that the fair value of a reporting is less than its carrying amount, we would then perform step one of the two-stepimpairment test; otherwise, no further impairment test would be required. In contrast, we can opt to bypass the qualitative assessmentfor any reporting unit in any period and proceed directly to step one of the two-step impairment test. Doing so does not preclude usfrom performing the qualitative assessment in any subsequent period.In the fourth quarter of 2016, we performed a qualitative assessment of the goodwill residing within the assets of our CCAsegment and determined that no indications of impairment existed.-52-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)Intangible assets are valued based on estimates of future cash flows and amortized over their estimated useful lives. Wecontinually evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of intangibleassets as well as other long-lived assets may warrant revision, or that the remaining balance of these assets may not be recoverable.When deemed necessary, we complete this evaluation by comparing the carrying amount of the assets with the estimated undiscountedfuture cash flows associated with them. If such evaluations indicate that the future undiscounted cash flows of amortizable long-livedassets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their estimated fair values.The estimation of useful lives and expected cash flows requires us to make significant judgments regarding future periods thatare subject to some factors outside of our control. Changes in these estimates can result in significant revisions to our carrying value ofthese assets and may result in material charges to our results of operations.Revenue RecognitionWe generate our revenue through the sale of products, as well as through licensing of technology product rights, royalties andsponsored research and development. Our policy is to recognize revenue when the applicable revenue recognition criteria have beenmet, which generally include the following:•Persuasive evidence of an arrangement exists;•Delivery has occurred or services rendered;•Price is fixed or determinable; and•Collectability is reasonably assured.Revenue from the sale of products is recognized after both the goods are shipped to the customer and acceptance has beenreceived, if required, with an appropriate provision for estimated returns and allowances. We do not permit general returns of productssold. Certain of our products have expiration dates. Our policy is to exchange certain outdated, expired product with the same product.We record an accrual for the estimated cost of replacing the expired product expected to be returned in the future, based on ourhistorical experience, adjusted for any known factors that reasonably could be expected to change historical patterns, such as regulatoryactions which allow us to extend the shelf lives of our products. Revenue from both direct sales to veterinarians and sales toindependent third-party distributors are generally recognized when goods are shipped. Our products are shipped complete and ready touse by the customer. The terms of the customer arrangements generally pass title and risk of ownership to the customer at the time ofshipment. Certain customer arrangements provide for acceptance provisions. Revenue for these arrangements is not recognized until theacceptance has been received or the acceptance period has lapsed. We reduce our revenue by the estimated cost of any rebates,allowances or similar programs, which are used as promotional programs.Recording revenue from the sale of products involves the use of estimates and management judgment. We must make adetermination at the time of sale whether the customer has the ability to make payments in accordance with arrangements. While we doutilize past payment history, and, to the extent available for new customers, public credit information in making our assessment, thedetermination of whether collectability is reasonably assured is ultimately a judgment decision that must be made by management. Wemust also make estimates regarding our future obligation relating to returns, rebates, allowances and similar other programs.-53-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)License revenue under arrangements to sell or license product rights or technology rights is recognized as obligations under theagreement are satisfied, which generally occurs over a period of time. Generally, licensing revenue is deferred and recognized over theestimated life of the related agreements, products, patents or technology. Nonrefundable licensing fees, marketing rights and milestonepayments received under contractual arrangements are deferred and recognized over the remaining contractual term using the straight-line method.Recording revenue from license arrangements involves the use of estimates. The primary estimate made by management isdetermining the useful life of the related agreement, product, patent or technology. We evaluate all of our licensing arrangements byestimating the useful life of either the product or the technology, the length of the agreement or the legal patent life and defer therevenue for recognition over the appropriate period.We may enter into arrangements that include multiple elements. Such arrangements may include agreements allowing for theusage of an instrument and a given level of consumables for one monthly payment. In these situations, we must determine whether thevarious elements meet the criteria to be accounted for as separate elements. If the elements cannot be separated, revenue is recognizedonce revenue recognition criteria for the entire arrangement have been met or over the period that the Company's obligations to thecustomer are fulfilled, as appropriate. If the elements are determined to be separable, the revenue is allocated to the separate elementsbased on relative fair value and recognized separately for each element when the applicable revenue recognition criteria have been met.In accounting for these multiple element arrangements, we must make determinations about whether elements can be accounted forseparately and make estimates regarding their relative fair values.In addition to our direct sales force, we utilize distributors to sell our products. Distributors purchase goods from us, take title tothose goods and resell them to their customers in the distributors' territory.Upfront payments we receive under arrangements for product, patent or technology rights in which we retain an interest in theunderlying product, patent or technology are initially deferred, and revenue is subsequently recognized over the estimated life of theagreement, product, patent or technology. Similarly, upfront payments we receive under agreements where we are obligated to maintaina product or technology sold to a third party and/or transfer know-how or technology to a third party are initially deferred and revenueis subsequently recognized over the estimated life of the agreement. Milestone payments related to an improvement in a product inwhich we retain an interest in the product are initially deferred and recognized over the estimated life of the agreement or product. Wereceived upfront and milestone payments totaling $3.0 million in 2014. We did not receive any such payments in 2016 or 2015.Revenue from royalties is recognized once we are informed of sales on which we are entitled to royalties.Stock-Based CompensationAccounting for stock-based compensation requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors based on estimated fair values. We estimate the fair value of all stock optionsand awards on the date of grant using the Black-Scholes pricing model, which is affected by our stock price, as well as assumptionsregarding a number of complex and subjective variables. These variables include our expected stock price volatility over the estimatedterm of the awards, the estimated term of the awards, which is dependent in part on employee option exercise behaviors, risk freeinterest rates and expected dividends. Our expected volatility assumption is based on the historical closing prices of our stock over aperiod equivalent to the expected life of the options.-54-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)Advertising CostsAdvertising costs are expensed as incurred and are included in sales and marketing expenses. Advertising expenses were $0.2million for the year ended December 31, 2016 and $0.1 million for each of the years ended December 31, 2015 and 2014.Income TaxesThe Company records a current provision for income taxes based on estimated amounts payable or refundable on tax returnsfiled or to be filed each year. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differencesbetween the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss andtax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates, in each tax jurisdiction, expected toapply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect ondeferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Theoverall change in deferred tax assets and liabilities for the period measures the deferred tax expense or benefit for the period. Deferredtax assets are reduced by a valuation allowance based on a judgmental assessment of available evidence if the Company is unable toconclude that it is more likely than not that some or all of the deferred tax assets will be realized.Foreign Currency TranslationThe functional currency of our Swiss subsidiary is the Swiss Franc. Assets and liabilities of our Swiss subsidiary are translatedusing the exchange rate in effect at the balance sheet date. Revenue and expense accounts and cash flows are translated using anaverage of exchange rates in effect during the period. Cumulative translation gains and losses are shown in the consolidated balancesheets as a separate component of stockholders' equity. Exchange gains and losses arising from transactions denominated in foreigncurrencies (i.e., transaction gains and losses) are recognized as a component of other income (expense) in current operations, as areexchange gains and losses on intercompany transactions expected to be settled in the near term.Taxes Collected from CustomersIn the course of doing business we collect various taxes from customers including, but not limited to, sales taxes. It is our policyto record revenue net of taxes collected from customers in our consolidated statements of income.Shipping and Handling CostsAmounts billed to customers for shipping and handling are recorded in sales. Shipping and handling costs incurred by us for thedelivery of products to customers are included in cost of sales.Recent Accounting PronouncementsIn March 2016, the Financial Accounting Standards Board ("FASB") issued guidance codified in Accounting Standards ASU,("ASU") Topic 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based PaymentAccounting". The update simplifies several aspects related to the accounting for share-based payment transactions, including theaccounting for income taxes, statutory tax withholding requirements and classification on the statement of cash flows. The update iseffective for annual and interim reporting periods beginning after December 15, 2016, with early adoption permitted. We early adoptedthe standard during the second quarter of 2016 and are therefore required to report the impacts-55-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)as though the standard had been adopted on January 1, 2016. Accordingly, we recognized additional income tax benefits as an increaseto earnings of $0.8 million ($0.11 per diluted share) in the twelve months ended December 31, 2016.The update did not impact anyperiods prior to January 1, 2016, as we applied the changes to the standard on a prospective basis. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)", which supersedes ASC 840, Leases, and creates a newtopic, ASC 842, Leases. This update requires lessees to recognize a lease liability and a lease asset for all leases, including operatingleases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitativedisclosures surrounding leases. This update is effective for fiscal years beginning after December 15, 2018 and interim periods withinthose fiscal years, with early adoption permitted. This update will be applied using a modified retrospective transition approach forleases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We arecurrently evaluating the effect of this update on our consolidated financial statements.In July 2015, the FASB issued ASU 2015-11 "Inventory - Simplifying the Measurement of Inventory (Topic 330)". This updaterequired an entity to measure inventory within the scope of the update at the lower of cost and net realizable value, and defines netrealizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion,disposal and transportation. ASU 2015-11 is effective for interim and annual periods beginning after December 15, 2016, with earlyadoption permitted, and is to be applied on a prospective basis. We early adopted this standard with no impact to our consolidatedfinancial statements.In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)". Upon the effectivedate, the ASU replaces almost all existing revenue recognition guidance, including industry specific guidance, in U.S. GAAP. In August2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date". Theamendments in this update deferred the effective date for implementation of ASU 2014-09 by one year and are now effective for annualand interim reporting periods beginning after December 15, 2017. The new standard permits two methods of adoption: retrospectivelyto each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applyingthe guidance recognized at the date of initial application (the modified retrospective method). We currently anticipate adopting thestandard using the modified retrospective method. We are still in the process of completing our analysis on the impact this guidance willhave on our consolidated financial statements and related disclosures.2. ACQUISITION AND RELATED PARTY ITEMSOn May 31, 2016, the Company closed a transaction (the "Merger") to acquire Cuattro Veterinary, LLC ("Cuattro International")from Kevin S. Wilson, and all of the members of Cuattro International (the "Members"). Pursuant to the Merger, the Company issued175,000 shares of the Company’s common stock, $0.01 par value per share (the "Common Stock"), to the Members on the Closing Date,at an aggregate value equal to approximately $6.3 million based on the adjusted closing price per share of the Common Stock asreported on the Nasdaq Stock Market on the Merger closing date. These shares were issued to the Members in a private placement inreliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2)thereof and the safe harbor provided by Rule 506 of Regulation D promulgated thereunder. Effective on the Merger closing date, eachof the Members executed lock-up agreements with the Company that restricted their ability to sell any of the shares of Common Stockreceived in the Merger until 180 days after the Merger closing date. In addition, the Company assumed approximately $1.5 million indebt as part of the transaction.-56-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)Mr. Wilson is a founder of Cuattro International, Cuattro, LLC, Cuattro Software, LLC and Cuattro Medical, LLC. Mr. Wilson,Mrs. Wilson and trusts for the benefit of Mr. and Mrs. Wilson’s children and family own a 100% interest in Cuattro, LLC and a majorityinterest in Cuattro Medical, LLC. Cuattro, LLC owns a 100% interest in Cuattro Software, LLC and, prior to the Merger, owned amajority interest in Cuattro International.The Company recorded assets acquired and assets assumed at their estimated fair values. Intangible assets were valued based ona report from an independent third party.The following summarizes the aggregate consideration paid by the Company and the allocation of the purchase price (inthousands):Common stock issued - 175,000 shares$6,347Debt assumed1,535Total fair value of consideration transferred$7,882Accounts receivable$222Inventories39Due from Cuattro, LLC963Property and equipment80Other tangible assets164Deferred tax asset56Intangible assets2,521Goodwill5,783Accounts payable(112)Deferred tax liability(905)Other assumed liabilities(929)Total fair value of consideration transferred$7,882Intangible assets acquired, amortization method and estimated useful lives as of May 31, 2016 was as follows (dollars inthousands): Useful Life Amortization Method Fair ValueCustomer relationships6.67 Straight-line $2,521Cuattro International is a provider to international markets of digital radiography technologies for veterinarians. As a leadingprovider of advanced veterinary diagnostic and specialty products, we made the acquisition in an effort to combine CuattroInternational's international reach with our domestic success in the imaging and blood testing markets in the United States. Internationalmarkets represent a significant portion of worldwide veterinary revenues for which we intend to compete.As of the closing date of the Merger, Cuattro International was renamed Heska Imaging International, LLC, and the Company'sinterest in both Heska Imaging International, LLC ("International Imaging") and Heska Imaging US, LLC ("US Imaging") wastransferred to the Company's wholly-owned subsidiary, Heska Imaging Global, LLC ("Global Imaging").-57-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)On February 24, 2013, the Company acquired a 54.6% interest in Cuattro Veterinary USA, LLC (the "Acquisition"), which wassubsequently renamed Heska Imaging US, LLC ("US Imaging). The remaining minority position (45.4)% in US Imaging is subject topurchase by Heska under performance-based puts and calls following the audit of either our 2016 and 2017 financial statements.Required performance criteria have been met in 2016 and we have been given notice that the put option is being exercised. We have 90days from the receipt of notice to deliver payment (any applicable payment in aggregate to be defined as the "Put Payment") for theImaging Minority’s position, and we consider notice to have been received immediately prior to the filing of this Form 10-K with theSEC. We plan to deliver the Put Payment and obtain the Imaging Minority’s position in US Imaging on May 31, 2017. Based on USImaging’s 2016 financial performance, the Put Payment is to be for a value of $13.8 million if we deliver all cash or up to $14.6 millionif we deliver a combination of cash and the maximum contractually allowable value of stock. While we have the right to deliver up to55% of the consideration in our Public Common Stock under certain circumstances, such stock is to be valued based on 90% of marketvalue (the "Delivery Stock Value") and is limited to approximately 650 thousand shares in any case. If the Delivery Stock Value pershare is less than the market value per share of our Public Common Stock at the time of the Acquisition, we do not have the right todeliver any Public Common Stock as consideration. While we have reported the Put Payment at $14.6 million for financial reportingpurposes, which contemplates our delivery of 55% of the Put Payment consideration in Public Common Stock, no final decision by ourBoard of Directors as to the relative use of cash and stock has been made and we may not be able to deliver any stock based on theDelivery Stock Value at the time of closing, as discussed above. The estimated Put Payment value of $14.6 million, which had beenlisted as "Non-controlling interest" on our consolidated balance sheets and accreted to its estimated redemption value in accordancewith US Imaging's Operating Agreement, is now listed as "Obligation to purchase minority interest" on the Company's consolidatedbalance sheets as of December 31, 2016.The following is a reconciliation of the non-controlling interest balance (in thousands):Balance December 31, 2015$15,747Accretion of Put Value(1,145)Balance reclassification to current liabilities$(14,602)Balance December 31, 2016$—Shawna M. Wilson, Clint Roth, DVM, Steven M. Asakowicz, Rodney A. Lippincott, Kevin S. Wilson and Cuattro, LLC ownapproximately 29.75%, 8.39%, 4.09%, 3.07%, 0.05% and 0.05% of US Imaging, respectively. Kevin S. Wilson is the Chief ExecutiveOfficer and President of the Company and the spouse of Shawna M. Wilson. Steven M. Asakowicz serves as Executive Vice President,Companion Animal Health Sales for the Company. Rodney A. Lippincott serves as Executive Vice President, Companion AnimalHealth Sales for the Company.Cuattro, LLC charged US Imaging $3.6 million from January 1, 2016 to May 31, 2016 and has charged Global Imaging $10.9million since June 1, 2016, primarily related to digital imaging products, for which there is an underlying supply contract withminimum purchase obligations, software and services as well as other operating expenses; Heska Corporation charged US Imaging $5.3million in 2016, primarily related to sales expenses; Heska Corporation has charged Cuattro, LLC $0.2 million, primarily related tofacility usage and other services.-58-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)At December 31, 2016, US Imaging had a $1.6 million note receivable, including accrued interest, from International Imaging,which is due on June 15, 2019 and which eliminates in consolidation of the Company's financial statements. This note was previouslylisted as "Note receivable – related party" on the Company's consolidated balance sheets and, as discussed above, was assumed as partof the Company's acquisition of International Imaging. At December 31, 2016, Heska Corporation had accounts receivable from USImaging of $5.6 million, including accrued interest, which eliminates in consolidation of the Company's financial statements; USImaging had a net receivable due from Cuattro, LLC of $0.1 million, which is included in "Due from – related parties" on theCompany's consolidated balance sheets; Global Imaging had net prepaid receivables from US Imaging of $1.2 million which eliminatesin consolidation of the Company's financial statements; all monies owed accrue interest at the same interest rate Heska Corporation paysunder its credit and security agreement with Wells Fargo once past due with the exception of the note receivable, which accrues at thisrate to its maturity date.3. INCOME TAXESAs of December 31, 2016, the Company had a domestic federal net operating loss carryforward ("NOL"), of approximately$96.0 million, a domestic alternative minimum tax credit of approximately $0.5 million and a domestic research and development taxcredit carryforward of approximately $0.4 million for federal tax purposes. The Company's NOL is expected to expire as follows ifunused: $90.0 million in 2018 through 2022, $5.5 million in 2024 and 2025 and $0.5 million in 2027 and later. The NOL and tax creditcarryforwards are subject to alternative minimum tax limitations and to examination by the tax authorities. In addition, the Companyhad a "change of ownership" as defined under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended (an"Ownership Change").The Company does not believe this Ownership Change will place a significant restriction on its ability to utilize its NOL in thefuture. The Company has established a valuation allowance against those NOL's and credits for which it is estimated to be more likelythan not that they will expire unutilized.We are subject to income taxes in the U.S. federal jurisdiction, and various foreign, state and local jurisdictions. Tax regulationswithin each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply.The rate in the year ended December 31, 2016 benefited from additional tax benefits related to employee share-based payment awardswhich are now recorded as income tax benefit or expense in earnings effective with the adoption of ASU 2016-09. We early adoptedthe ASU during the second quarter of 2016 and are therefore required to report the impacts as though the accounting standard updatehad been adopted on January 1, 2016. Accordingly, we recognized additional income tax benefits as an increase to earnings of $0.8million in the year ended December 31, 2016.Cash paid for income taxes for the twelve months ended December 31, 2016, 2015, and 2014 was $357 thousand, $55thousand and $272 thousand, respectively.The components of income before income taxes were as follows (in thousands): Year Ended December 31, 2016 2015 2014 Domestic $16,375 $8,325 $2,837Foreign 129 102 113 $16,504 $8,427 $2,950-59-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)Temporary differences that give rise to the components of net deferred tax assets are as follows (in thousands): December 31, 2016 2015Inventory $1,172 $954Accrued compensation 114 267Stock Options 811 344Research and development 438 440Alternative minimum tax credit 543 367Deferred revenue 2,934 3,638Property and equipment 2,750 1,967Net operating loss carryforwards – domestic 34,706 37,845Capital Lease (2,833) (384)Other 34 (8) 40,669 45,430Valuation allowance (19,547) (19,547)Total net deferred tax assets $21,122 $25,883The components of the income tax expense are as follows (in thousands): Year Ended December 31, 2016 2015 2014Current income tax expense: Federal $197 $1,492 $11State 179 65 7Foreign 31 24 29Total current expense $407 $1,581 $47Deferred income tax expense: Federal $3,545 $1,043 $1,181State 387 284 123Foreign — — —Total deferred expense 3,932 1,327 1,304Total income tax expense $4,339 $2,908 $1,351-60-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)The Company's income tax expense (benefit) relating to income (loss) for the periods presented differs from the amounts thatwould result from applying the federal statutory rate to that income (loss) as follows: Year Ended December 31, 2016 2015 2014Statutory federal tax rate34 % 34 % 34 %State income taxes, net of federal benefit2 % 3 % 5 %Non-controlling interest in Heska Imaging US, LLC(3)% (1)% 12 %Other permanent differences(7)% (1)% (3)%Change in tax rate— % (1)% 2 %Change in valuation allowance— % (14)% 78 %Other— % 15 % (82)%Effective income tax rate26 % 35 % 46 %ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain taxpositions recognized in the financial statements. Tax positions must meet a "more-likely-than-not" recognition threshold before a benefitis recognized in the financial statements. As of December 31, 2016, the Company has not recorded a liability for uncertain taxpositions. The Company would recognize interest and penalties related to uncertain tax positions in income tax expense. No interest andpenalties related to uncertain tax positions were accrued at December 31, 2016.4. EARNINGS PER SHAREBasic earnings per share ("EPS") is computed by dividing net income attributable to Heska Corporation by the weighted-averagenumber of common shares outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPSexcept that the numerator is increased to exclude charges that would not have been incurred, and the denominator is increased toinclude the number of additional common shares that would have been outstanding (using the if-converted and treasury stockmethods), if securities containing potentially dilutive common shares (stock options and restricted stock units but excluding options topurchase fractional shares resulting from the Company's December 2010 1-for-10 reverse stock split) had been converted to commonshares, and if such assumed conversion is dilutive.The following is a reconciliation of the weighted-average shares outstanding used in the calculation of basic and dilutedearnings per share for the years ended December 31, 2016, 2015, and 2014 (in thousands, except per share data): Years ended December 31, 2016 2015 2014Net income attributable to Heska Corporation$10,508 $5,239 $2,603 Basic weighted-average common shares outstanding6,783 6,509 5,951Assumed exercise of dilutive stock options and restricted stock units578 565 458Diluted weighted-average common shares outstanding7,361 7,074 6,409 Basic earnings per share$1.55 $0.80 $0.44Diluted earnings per share$1.43 $0.74 $0.41-61-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)The following stock options and restricted units were excluded from the computation of diluted earnings per share because theywould have been anti-dilutive (in thousands): Years ended December 31, 2016 2015 2014Stock options234 144 3675. GOODWILL AND OTHER INTANGIBLESThe following summarizes the changes in goodwill during the years ended December 31, 2016 and 2015 (in thousands): Year Ended December 31, 2016 2015Carrying amount, December 31, 2015$20,910 $20,903Additions and adjustments5,737 7Carrying amount, December 31, 2016$26,647 $20,910Other intangibles assets, net consisted of the following as of December 31, 2016 and 2015 (in thousands): Year Ended December 31, 2016 2015Gross carrying amount$2,622 $788Accumulated amortization(276) (732)Net carrying amount$2,346 $56Amortization expense relating to other intangibles is as follows (in thousands): Years Ended December 31, 2016 2015 2014Amortization expense$230 $246 $260 Estimated amortization expense related to intangibles for each of the five years from 2017 through 2021 and thereafter is asfollows (in thousands):Year Ending December 31, 2017$3882018388201938820203882021384Thereafter410 $2,346-62-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)6. PROPERTY AND EQUIPMENTDetail of property and equipment is as follows (in thousands): December 31, 2016 2015Land$377 $377Building2,868 2,868Machinery and equipment36,588 35,284Leasehold and building improvements7,662 6,673Construction in progress1,655 1,496 49,150 46,698Less accumulated depreciation(32,569) (29,678)Total property and equipment, net$16,581 $17,020The Company has utilized marketing programs whereby its instruments in inventory may be placed in a customer's location ona rental basis. The cost of these instruments is transferred to machinery and equipment or other long-term assets and depreciated,typically over a five to seven-year period depending on the circumstance under which the instrument is placed with the customer. Totalcosts transferred from inventory were approximately $1.8 million, $4.1 million and $4.6 million for the years ended December 31,2016, 2015 and 2014, respectively.The Company has sold certain customer rental contracts and underlying assets to third parties under agreements that once thecustomer has met the customer obligations under the contract, ownership of the assets underlying the contract would be returned to theCompany. The Company enters a debit to cash and a corresponding credit to deferred revenue at the time of these sales. Since theCompany anticipates it will regain ownership of the assets underlying these sales, the Company reports these assets as part of propertyand equipment and depreciates these assets in accordance with its depreciation policies. The Company had $0.3 million and $2.2million of net property and equipment related to these transactions as of December 31, 2016 and December 31, 2015, respectively, allrelated to the Company's 54.6%-owned subsidiary, US Imaging.Depreciation expense for property and equipment was $4.4 million, $4.0 million and $3.4 million for the years endedDecember 31, 2016, 2015 and 2014, respectively.The Company capitalizes third-party software costs, where appropriate, and reports such costs, net of accumulated amortization,on the "property and equipment, net" line of its consolidated balance sheets. We had $0.4 million of such capitalized costs, net ofaccumulated amortization, on the "property and equipment, net" line of each of our consolidated balance sheets as of December 31,2016 and 2015, respectively. Capitalized software costs in a given year are reported on the "purchases of property and equipment" lineitem of the Company's consolidated statements of cash flows. We had $251 thousand, $51 thousand and $31 thousand of capitalizedsoftware costs reported on the "purchases of property and equipment" line item of our consolidated statements of cash flows for theyears ended December 31, 2016, 2015 and 2014, respectively.-63-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)7. ACCRUED LIABILITIESAccrued liabilities consisted of the following as of December 31, 2016 and 2015 (in thousands): 2016 2015Accrued payroll and employee benefits$2,166 $1,626Accrued property taxes748 594Other3,555 3,196Total accrued liabilities$6,469 $5,416Other accrued liabilities consists of items that are individually less than 5% of total current liabilities.8. CAPITAL STOCKStock Option PlansWe have two stock option plans which authorize granting of stock options and stock purchase rights to our employees, officers,directors and consultants to purchase shares of common stock. In 1997, the board of directors adopted the 1997 Stock Incentive Plan(the "1997 Plan") and terminated two prior option plans. All shares that remained available for grant under the terminated plans wereincorporated into the 1997 Plan, including shares subsequently canceled under prior plans. In May 2012, the stockholders approved anamendment to the 1997 Plan allowing for an increase of 250,000 shares and an annual increase through 2016 based on the number ofnon-employee directors serving as of our Annual Meeting of Stockholders, subject to a maximum of 45,000 shares per year. In May2016, the stockholders approved a further amendment to the 1997 Plan to authorize additional 500,000 shares to be available forissuance thereunder. In May 2003, the stockholders approved a new plan, the 2003 Equity Incentive Plan, which allows for the grantingof options for up to 239,050 shares of the Company's common stock. The number of shares reserved for issuance under both plans asof December 31, 2016 was 407,339.The stock options granted by the board of directors may be either incentive stock options ("ISOs") or non-qualified stockoptions ("NQs"). The exercise price for options under all of the plans may be no less than 100% of the fair value of the underlyingcommon stock for ISOs or 85% of fair value for NQs. Options granted will expire no later than the tenth anniversary subsequent to thedate of grant or three months following termination of employment, except in cases of death or disability, in which case the options willremain exercisable for up to twelve months. Under the terms of the 1997 Plan, in the event we are sold or merged, outstanding optionswill either be assumed by the surviving corporation or vest immediately.There are four key inputs to the Black-Scholes model which we use to estimate the fair value for options which it issues:expected term, expected volatility, risk-free interest rate and expected dividends, all of which require us to make estimates. Ourestimates for these inputs may not be indicative of actual future performance and changes to any of these inputs can have a materialimpact on the resulting estimated fair value calculated for the option. Our expected term input was estimated based on our historicalexperience for time from option grant to option exercise for all employees in 2016, 2015 and 2014. We treated all employees in onegrouping in all three years. Our expected volatility input was estimated based on our historical stock price volatility in 2016, 2015 and2014. Our risk-free interest rate input was determined based on the U.S. Treasury yield curve at the time of option issuance in 2016,2015 and 2014. Our expected dividends inputs were zero in all periods as we did not anticipate paying dividends in the foreseeablefuture.-64-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)Weighted average assumptions used in 2016, 2015 and 2014 for each of these four key inputs are listed in the following table: 2016 2015 2014Risk-free interest rate1.76% 1.41% 1.21%Expected lives4.5 years 3.4 years 3.4 yearsExpected volatility41% 41% 43%Expected dividend yield0% 0% 0%A summary of our stock option plans, excluding options to purchase fractional shares resulting from our December 2010 1-for-10 reverse stock split, is as follows: Year Ended December 31, 2016 2015 2014 Options WeightedAverageExercise Price Options WeightedAverageExercise Price Options WeightedAverageExercise PriceOutstanding at beginning of period940,610 $14.163 1,074,251 $10.110 1,321,232 $10.386Granted at Market129,855 $67.706 146,446 $36.904 134,800 $16.398Canceled(463) $14.881 (28,440) $10.080 (218,926) $17.786Exercised(240,385) $11.886 (251,647) $10.559 (162,855) $7.234Outstanding at end of period829,617 $23.203 940,610 $14.163 1,074,251 $10.110Exercisable at end of period532,703 $12.140 621,559 $10.269 729,175 $9.800The total estimated fair value of stock options granted were computed to be approximately $3.2 million, $1.6 million and $0.7million during the years ended December 31, 2016, 2015 and 2014, respectively. The amounts are amortized ratably over the vestingperiods of the options. The weighted average estimated fair value of options granted was computed to be approximately $24.59, $11.35and $5.28 during the years ended December 31, 2016, 2015 and 2014, respectively. The total intrinsic value of options exercised was$9.9 million, $4.7 million and $0.7 million during the years ended December 31, 2016, 2015 and 2014, respectively. The cashproceeds from options exercised was $1.9 million, $1.8 million and $1.2 million during the years ended December 31, 2016, 2015 and2014, respectively.The following table summarizes information about stock options outstanding and exercisable at December 31, 2016, excludingoutstanding options to purchase an aggregate of 0.5 fractional shares resulting from our December 2010 1-for-10 reverse stock splitwith a weighted average remaining contractual life of 0.34 years at an exercise price of $22.50. We intend to issue whole shares onlyfrom option exercises.-65-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Options Outstanding Options ExercisableExercise Prices Number ofOptionsOutstandingatDecember 31,2016 WeightedAverageRemainingContractualLife in Years WeightedAverageExercisePrice Number ofOptionsExercisableatDecember 31,2016 WeightedAverageExercisePrice$ 4.40 - $ 6.90 164,794 3.94 $5.679 163,663 $5.676$ 6.91 - $ 7.36 157,323 6.89 $7.360 114,670 $7.360$ 7.37 - $18.13 214,697 6.68 $12.800 162,451 $11.317$18.14 - $39.76 182,303 7.93 $34.954 91,878 $31.057$39.77 - $72.85 110,500 9.99 $72.721 41 $56.587$ 4.40 - $72.85 829,617 6.89 $23.203 532,703 $12.140As of December 31, 2016, there was approximately $4.5 million of total unrecognized compensation cost related to outstandingstock options. That cost is expected to be recognized over a weighted-average period of 1.9 years with all cost to be recognized by theend of December 2018, assuming all options vest according to the vesting schedules in place at December 31, 2016. As ofDecember 31, 2016, the aggregate intrinsic value of outstanding options was approximately $40.3 million and the aggregate intrinsicvalue of exercisable options was approximately $31.7 million.Employee Stock Purchase Plan (the "ESPP")Under the 1997 Employee Stock Purchase Plan, we are authorized to issue up to 450,000 shares of common stock to ouremployees, of which 408,668 had been issued as of December 31, 2016. On May 5, 2015, our shareholders approved the amendmentand restatement of the ESPP, including a 75,000 share increase to 450,000 total shares authorized under the ESPP as well as changesdiscussed below as compared to the ESPP prior to the amendment and restatement. Employees who are expected to work at least 20hours per week and 5 months per year are eligible to participate and can choose to have up to 10% of their compensation withheld topurchase our stock under the ESPP when they choose to withhold a whole percentage of their compensation.Beginning on July 1, 2013, our ESPP had a 27-month offering period and three-month accumulation periods ending on eachMarch 31, June 30, September 30 and December 31. The purchase price of stock on March 31, June 30, September 30 and December31 was the lesser of (1) 85% of the fair market value at the time of purchase and (2) the greater of (i) 95% of the fair market value at thebeginning of the applicable offering period or (ii) 65% of the fair market value at the time of purchase. In addition, participatingemployees may purchase shares under the ESPP at the beginning of an applicable offering period for a purchase price of stock equal to95% of the fair market value at such time or at 5 pm on a day other than March 31, June 30, September 30 and December 31 during theapplicable offering period for a purchase price of stock equal to 95% of the fair market value at purchase.Beginning April 1, 2015, employees may elect to withhold a positive fixed amount from each compensation payment inaddition to the previous approach of withholding a whole percentage of such compensation payment, with all withholding for a givenemployee subject to a maximum monthly amount of $2,500 following the amendment and restatement as opposed to a $25,000maximum annual amount prior to the amendment and restatement. For offering periods beginning on or after April 1, 2015, thepurchase price of stock on March 31, June 30, September 30 and December 31 is to be the lesser of (1) 85% of the fair market value atthe time of purchase and (2) the greater of (i) 85% of the fair market value at the beginning of the applicable offering period, (ii) the fairmarket value at the beginning of the applicable offering period less-66-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)1 cent and (iii) 65% of the fair market value at the time of purchase. In addition, participating employees may elect to purchase sharesunder the ESPP at the beginning of an applicable offering period for a purchase price of stock equal to the greater of (1) 85% of the fairmarket value at the beginning of the applicable offering period and (2) the fair market value at the beginning of the applicable offeringperiod less 1 cent or at 5 pm on a day other than March 31, June 30, September 30 and December 31 during the applicable offeringperiod for a purchase price of stock equal to the greater of (1) 85% of the fair market value at the time of purchase and (2) the fairmarket value at the time of purchase less 1 cent.We issued 17,057, 16,673 and 29,847 shares under the ESPP for the years ended December 31, 2016, 2015 and 2014,respectively.For the years ended December 31, 2016, 2015 and 2014, we estimated the fair values of stock purchase rights granted under theESPP using the Black-Scholes pricing model and the following weighted average assumptions: 20162015 2014Risk-free interest rate0.54%0.27% 0.23%Expected lives1.2 years1.2 years 1.3 yearsExpected volatility42%36% 34%Expected dividend yield0%0% 0%The weighted-average fair value of the purchase rights granted was $8.23, $6.25 and $2.61 per share for the years endedDecember 31, 2016, 2015 and 2014, respectively.Restricted Stock IssuanceOn March 26, 2014, we issued 63,572 shares to Robert B. Grieve, Ph.D., who was our Executive Chair, pursuant to anemployment agreement between Dr. Grieve and the Company effective as of March 26, 2014 (the "Grieve Employment Agreement").The shares were issued in five tranches and are subject to time-based vesting and other provisions outlined in the Grieve EmploymentAgreement. All shares were to vest in full as of April 30, 2017. Effective on October 1, 2015, the Grieve Employment Agreement wasterminated and, in connection therewith, the Company entered into a Separation and Release Agreement dated as of October 1, 2015(the "Release Agreement") with Dr. Grieve. Pursuant to the Release Agreement, the Company agreed to treat the termination of theGrieve Employment Agreement as a termination without cause, entitling Dr. Grieve to the immediate vesting of 55,715 shares, 14,373of which were withheld for tax purposes. As a result of the termination of the Grieve Employment Agreement, and as acknowledged inthe Release Agreement, effective October 1, 2015, Dr. Grieve began serving as a consultant to the Company pursuant to the ConsultingAgreement (Founder Emeritus) dated as of March 26, 2014 (the "Consulting Agreement"). The remaining 7,857 shares issued to Dr.Grieve on March 26, 2014 vested on April 30, 2016, of which 2,525 shares were withheld for tax purposes.On March 26, 2014, we issued 110,000 shares to Mr. Wilson pursuant to an employment agreement between Mr. Wilson andthe Company effective as of March 26, 2014 (the "Wilson Employment Agreement"). The shares were issued in four equal tranches andare subject to time-based vesting and other provisions outlined in the Wilson Employment Agreement. The first tranche vested onSeptember 26, 2014, and each of the three remaining tranches is to vest on the succeeding March 26 until all shares are vested in full asof March 26, 2017. On May 6, 2014, we issued an additional 130,000 shares to Mr. Wilson following a vote of approval on theissuance by our stockholders. The shares were issued in ten equal tranches, five of which were subject to vesting based on theachievement of certain stock price targets as defined and further described in the Wilson Employment Agreement and five of whichwere subject to vesting based on certain-67-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)"Adjusted EBITDA" targets as defined and further described in the Wilson Employment Agreement. All shares subject to vesting basedon "Adjusted EBITDA" vested based on our 2014 performance. Of the five tranches based on the achievement of certain stock pricetargets, one vested in 2014 and the remaining four vested in 2015.On March 17, 2015, the Company issued unvested shares to certain Executive Officers related to performance-based restrictedstock grants (the "Performance Grants") and performance-based restricted stock grants related to the Company's 2015 ManagementIncentive Plan (the "2015 MIP Grants"). The Company issued 52,956 shares under the Performance Grants and 24,649 shares under2015 MIP Grants. The Performance Grants have met the underlying performance condition based on the Company's 2015 financialperformance and are to cliff vest on March 17, 2018, subject to other vesting provisions in the underlying restricted stock grantagreement. The 2015 MIP Grants were subject to the Company’s achievement of certain financial goals and other vesting provisions inthe underlying restricted stock grant agreement. On March 2, 2016, the Company vested 14,364 shares related to the 2015 MIP Grantsbased on the respective performance criteria, including 4,788 shares withheld for tax, and canceled the remaining 10,285 shares.On March 2, 2016, the Company issued 15,000 unvested shares to certain Executive Officers related to performance-basedrestricted stock grants as part of the Company’s 2016 Management Incentive Plan (the "2016 MIP Grants"). The 2016 MIP Grants arescheduled to vest on the date MIP Payouts are to be made under the 2016 Management Incentive Plan and are subject to the Company’sachievement of certain financial goals and other vesting provisions in the underlying restricted stock grant agreement.Restrictions on the transfer of Company stockThe Company's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), places restrictions (the"Transfer Restrictions") on the transfer of the Company's stock that could adversely affect the Company's ability to utilize its domesticFederal Net Operating Loss Position. In particular, the Transfer Restrictions prevent the transfer of shares without the approval of theCompany's Board of Directors if, as a consequence of such transfer, an individual, entity or groups of individuals or entities wouldbecome a 5-percent holder under Section 382 of the Internal Revenue Code of 1986, as amended, and the related Treasury regulations,and also prevents any existing 5-percent holder from increasing his or her ownership position in the Company without the approval ofthe Company's Board of Directors. Any transfer of shares in violation of the Transfer Restrictions (a "Transfer Violation") shall be voidab initio under the Certificate of Incorporation, and the Company's Board of Directors has procedures under the Certificate ofIncorporation to remedy a Transfer Violation including requiring the shares causing such Transfer Violation to be sold and any profitresulting from such sale to be transferred to a charitable entity chosen by the Company's Board of Directors in specified circumstances.9. ACCUMULATED OTHER COMPREHENSIVE INCOMEAccumulated other comprehensive income consisted of the following (in thousands): Minimumpension liability Foreign currencytranslation Sale of equityinvestment Total accumulatedother comprehensiveincomeBalances at December 31, 2015$(576) $673 $90 $187Current period other comprehensive income (loss)75 (75) (90) (90)Balances at December 31, 2016$(501) $598 $— $97-68-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)10. COMMITMENTS AND CONTINGENCIESThe Company holds certain rights to market and manufacture all products developed or created under certain research,development and licensing agreements with various entities. In connection with such agreements, the Company has agreed to pay theentities royalties on net product sales. Royalties of $0.4 million became payable under these agreements in each of the years endedDecember 31, 2016, 2015 and 2014.The Company has contracts with suppliers for unconditional annual minimum inventory purchases and milestone obligations tothird parties the Company believes are likely to be triggered currently totaling approximately $0.6 million in 2017 and $0.3 million in2018.The Company has entered into operating leases for its office and research facilities and certain equipment with future minimumpayments as of December 31, 2016 as follows (in thousands):Year Ending December 31, 2017$2,090 20181,970 20191,810 20201,696 20211,677 Thereafter3,202 $12,445The Company had rent expense of $2.0 million in each of the years ended December 31, 2016 and 2015 and $1.9 million in theyear ended December 31, 2014.From time to time, the Company may be involved in litigation relating to claims arising out of its operations. On March 12,2015, a complaint was filed against us by Shaun Fauley in the United States District Court Northern District of Illinois alleging ourtransmittal of unauthorized faxes in violation of the federal Telephone Consumer Protection Act of 1991, as amended by the Junk FaxPrevention Act of 2005, as a class action seeking stated damages of the greater of actual monetary loss or five hundred dollars perviolation. We intend to defend ourselves vigorously in this matter. At December 31, 2016, the Company was not a party to any otherlegal proceedings that were expected, individually or in the aggregate, to have a material adverse effect on our business, financialcondition or operating results.The Company's current terms and conditions of sale include a limited warranty that its products and services will conform topublished specifications at the time of shipment and a more extensive warranty related to certain of its products. The Company alsosells a renewal warranty for certain of its products. The typical remedy for breach of warranty is to correct or replace any defectiveproduct, and if not possible or practical, the Company will accept the return of the defective product and refund the amount paid.Historically, the Company has incurred minimal warranty costs. The Company's warranty reserve was $0.4 million as of December 31,2016 and 2015.-69-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)11. INTEREST AND OTHER EXPENSE (INCOME)Interest and other expense (income) consisted of the following (in thousands): Year Ended December 31, 2016 2015 2014Interest income$(124) $(172) $(190)Interest expense160 200 206Other expense (income), net(7) 102 (55) $29 $130 $(39)Cash paid for interest was $78 thousand, $90 thousand and $92 thousand for the years ended December 31, 2016, 2015 and2014, respectively.12. CREDIT FACILITY AND LONG-TERM DEBTAt December 31, 2016, we had a $15.0 million asset-based revolving line of credit with Wells Fargo which has a maturity dateof December 31, 2017 as part of our credit and security agreement with Wells Fargo. At December 31, 2016, we had $0.7 million ofborrowings outstanding on this line of credit. Our ability to borrow under this line of credit varies based upon available cash, eligibleaccounts receivable and eligible inventory. Any interest on borrowings due is to be charged at a stated rate of three month LIBOR plus2.25% and payable monthly. There is an annual minimum interest charge of $75 thousand under the agreement. We are required tocomply with various financial and non-financial covenants, and we have made various representations and warranties under ouragreement with Wells Fargo. A key financial covenant is based on a fixed charge coverage ratio, as defined in our agreement withWells Fargo. We were in compliance with all financial covenants as of December 31, 2016 and our available borrowing capacity basedupon eligible accounts receivable and eligible inventory under our revolving line of credit was approximately $12.9 million.Long-term debt consists of the following (in thousands): December 31, 2016 2015Term loan with a financial entity due in monthly installments beginning July 2012 with thebalance to be paid in full in June 2017 and a stated interest rate of 6.0%.$78 $228Less current maturities78 159Long-term debt, net of current portion$— $69 -70-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)13. SEGMENT REPORTINGThe Company is comprised of two reportable segments, Core Companion Animal Health ("CCA") and Other Vaccines,Pharmaceuticals and Products ("OVP"). The CCA segment includes diagnostic instruments and supplies, as well as single use diagnosticand other tests, pharmaceuticals and vaccines, primarily for canine and feline use. The CCA segment also includes digital radiographyand ultrasound products along with embedded software and support, data hosting and other services from Heska Imaging. Theseproducts are sold directly by the Company as well as through independent third-party distributors and through other distributionrelationships. CCA segment products manufactured at the Des Moines, Iowa production facility included in the OVP segment's assetsare transferred at cost and are not recorded as revenue for the OVP segment. The OVP segment includes private label vaccine andpharmaceutical production, primarily for cattle, but also for other species including equine, porcine, avian, feline and canine. All OVPproducts are sold by third parties under third-party labels.-71-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)Summarized financial information concerning the Company's reportable segments is shown in the following table (inthousands):Year Ended December 31, 2016 CoreCompanionAnimal Health Other Vaccines,Pharmaceuticalsand Products TotalTotal revenue $107,398 $22,685 $130,083Operating Income 13,015 3,518 16,533Income before income taxes 12,938 3,566 16,504Total assets 110,995 19,849 130,844Net assets 68,072 18,903 86,975Capital expenditures 1,135 2,282 3,417Depreciation and amortization 3,800 845 4,645Year Ended December 31, 2015 CoreCompanionAnimal Health Other Vaccines,Pharmaceuticals andProducts TotalTotal revenue $84,249 $20,348 $104,597Operating Income 4,911 3,646 8,557Income before income taxes 4,836 3,591 8,427Total assets 92,567 17,152 109,719Net assets 48,175 15,353 63,528Capital expenditures 1,177 2,596 3,773Depreciation and amortization 3,478 709 4,187Year Ended December 31, 2014 CoreCompanionAnimal Health Other Vaccines,Pharmaceuticals andProducts TotalTotal revenue $72,354 $17,483 $89,837Operating Income 1,198 1,713 2,911Income before income taxes 1,290 1,660 2,950Total assets 85,361 11,483 96,844Net assets 41,286 11,846 53,132Capital expenditures 1,864 473 2,337Depreciation and amortization 2,954 758 3,712-72-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)Revenue is attributed to individual countries based on customer location. Total revenue by principal geographic area was asfollows (in thousands): For the Years Ended December 31, 2016 2015 2014United States$120,082 $97,164 $83,584Canada2,378 1,833 1,123Europe4,781 2,086 2,264Other International2,842 3,514 2,866Total$130,083 $104,597 $89,837 Total assets by principal geographic areas were as follows (in thousands): For the Years Ended December 31, 2016 2015 2014United States$127,827 $106,780 $93,977Europe3,017 2,939 2,867Total$130,844 $109,719 $96,844 14. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (Unaudited)The following tables present quarterly unaudited results for each of the two years in the periods ended December 31, 2016 and2015 (amounts in thousands, except per share data). Q1 Q2 Q3 Q4 Total2016 Total revenue$27,146 $29,965 $33,430 $39,542$130,083Gross profit11,442 12,682 13,718 16,050 53,892Operating income1,970 3,556 4,492 6,515 16,533Net income1,447 2,742 3,343 4,633 12,165Net income attributable to Heska Corporation1,186 2,522 3,347 3,453 10,508Basic earnings per share attributable to Heska Corporation0.18 0.38 0.49 0.50 1.55Diluted earnings per share attributable to Heska Corporation0.17 0.35 0.45 0.46 1.43 2015 Total revenue$22,894 $23,910 $28,034 $29,759 $104,597Gross profit10,084 10,297 11,597 12,235 44,213Operating income1,021 1,829 2,142 3,565 8,557Net income583 1,178 1,383 2,375 5,519Net income attributable to Heska Corporation598 1,197 1,415 2,029 5,239Basic earnings per share attributable to Heska Corporation0.10 0.19 0.22 0.29 0.80Diluted earnings per share attributable to Heska Corporation0.09 0.17 0.20 0.28 0.74-73-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)15. SUBSEQUENT EVENTSAs discussed in more detail above in Item 1A., Risk Factors, under the caption “We have significant related party transactions,including the planned purchase of the minority interest in Heska Imaging US, LLC via a put option which has been exercised”, theImaging Minority has given us notice of exercise of the put option to sell to us all of the Imaging Minority's position in US Imaginggranted to them under the Operating Agreement that was executed in connection with the Acquisition because the targeted US Imagingperformance criteria has been met within the requisite period of time. Based on US Imaging’s 2016 financial performance, the PutPayment is to be for a value of $13.8 million if we deliver all cash or up to $14.6 million if we deliver a combination of cash and stock.We plan to deliver the Put Payment and obtain the Imaging Minority’s position in US Imaging on or about May 31, 2017. Theadditional information concerning the Put Payment and put option exercise discussed under the foregoing Risk Factors caption andelsewhere in this annual report on Form 10-K is incorporated herein by reference thereto.Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.None.Item 9A. Controls and Procedures.Evaluation of Disclosure Controls and ProceduresOur management, with the participation of our chief executive officer and our chief financial officer, evaluated theeffectiveness of our disclosure controls and procedures, as defined by Rule 13a-15 of the Exchange Act, as of December 31, 2016.Based on this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls andprocedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submitunder the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC's rules and formsand that such information is accumulated and communicated to our management, including our chief executive officer and chieffinancial officer, as appropriate, to allow timely decisions regarding disclosure.Management's Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting as defined inRules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, includingour chief executive officer and chief financial officer, the Company conducted an evaluation of the effectiveness of its internal controlover financial reporting based on criteria outlined in the 1992 COSO Internal Control over Financial Reporting Guidance for SmallerPublic Companies, a supplemental implementation guide issued in 2007, which modified criteria established in the framework inInternal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based onthis evaluation, the Company's management has concluded that the Company's internal control over financial reporting was effective asof December 31, 2016.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because ofchanges in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even an effectivesystem of internal control will provide only reasonable assurance that the objectives of the internal control system are met.-74-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EKS&H LLLP, an independent registered public accounting firm, has audited our Consolidated Financial Statements included inthis Form 10-K, and as part of the audit, has issued a report, included herein, on the effectiveness of our internal control over financialreporting as of December 31, 2016.Changes in Internal Control over Financial ReportingThere was no change in our internal control over financial reporting that occurred during the fourth quarter of 2016 that hasmaterially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Item 9B.Other Information.On March 3, 2017, our Compensation Committee further amended the Company’s restricted stock grant agreement forms to beused for grants of awards to its employees, consultants and outside directors, as applicable, under or in connection with the Company’s1997 Stock Incentive Plan, as amended and restated, the Company’s 2003 Equity Incentive Plan, as amended and restated, and theCompany’s Amended and Restated Management Incentive Plan. The amendments added additional performance-based criteria to thevesting provisions and made minor other conforming changes, including to make consistent among the several forms the vestingprovisions in the case of a participant’s death or disability or a change in control of the Company. The foregoing summary is qualifiedin its entirety by reference to the full text of each of the form agreements, a copy of each of which is attached hereto as an exhibit and isincorporated herein by reference thereto.PART IIICertain information required by Part III is incorporated by reference to our definitive Proxy Statement filed with the Securitiesand Exchange Commission in connection with the solicitation of proxies for our 2017 Annual Meeting of Stockholders.Item 10.Directors, Executive Officers and Corporate Governance.Executive OfficersThe information required by this item with respect to executive officers is incorporated by reference to Item 1 of this report andcan be found under the caption "Executive Officers of the Registrant."DirectorsThe information required by this section with respect to our directors will be incorporated by reference to the information in thesections entitled "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement.Code of EthicsOur Board of Directors has adopted a code of ethics for our senior executive and financial officers (including our principalexecutive officer, principal financial officer and principal accounting officer). The code of ethics is available on our website atwww.heska.com under the Corporate Governance section under the Investor Relations section under the "Company" tab. We intend todisclose any amendments to or waivers from the code of ethics at that location.Audit CommitteeThe information required by this section with respect to our Audit Committee will be incorporated by reference to theinformation in the section entitled "Board Structure and Committees" in the Proxy Statement.-75-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Section 16(a) Beneficial Ownership Reporting ComplianceThe information required by this item is incorporated by reference to the information in the section entitled "Section 16(a)Beneficial Ownership Reporting Compliance" in the Proxy Statement.Item 11.Executive Compensation.The information required by this section will be incorporated by reference to the information in the sections entitled "DirectorCompensation," "Executive Compensation," "Compensation Committee Report" and "Compensation Committee Interlocks and InsiderParticipation" in the Proxy Statement.Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The other information required by this section will be incorporated by reference to the information in the section entitled"Ownership of Securities - Common Stock Ownership of Certain Beneficial Owners and Management" in the Proxy Statement.Equity Compensation Plan InformationThe following table sets forth information about our common stock that may be issued upon exercise of options and rightsunder all of our equity compensation plans as of December 31, 2016, including the 1997 Stock Incentive Plan, the 2003 StockIncentive Plan and the 1997 Employee Stock Purchase Plan. Our stockholders have approved all of these plans.Plan Category(a) Number of Securities to be IssuedUpon Exercise of OutstandingOptions and Rights (1) (b) Weighted-Average ExercisePrice of Outstanding Options andRights (1) (c) Number of SecuritiesRemaining Available for FutureIssuance Under EquityCompensation Plans (excludingsecurities reflected in column (a))Equity Compensation PlansApproved by Stockholders829,617 $23.20 449,950Equity Compensation Plans NotApprovedby Stockholders None None NoneTotal829,617 $23.20 449,950(1)Excluding outstanding options to purchase an aggregate of 0.5 fractional shares resulting from our December 2010 reverse stock split.Item 13.Certain Relationships and Related Transactions and Director Independence.The information required by this section will be incorporated by reference to the information in the sections entitled "BoardStructure and Committees" and "Significant Relationships and Transactions with Directors, Officers or Principal Stockholders" in theProxy Statement.Item 14.Principal Accountant Fees and Services.The information required by this section will be incorporated by reference to the information in the section entitled "AuditorFees and Services" in the Proxy Statement.The information required by Part III to the extent not set forth herein, will be incorporated herein by reference to our definitiveProxy Statement for the 2017 Annual Meeting of Stockholders.-76-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.PART IVItem 15.Exhibits and Financial Statement Schedules.(a) The following documents are filed as a part of this Form 10-K.(1) Financial Statements:Reference is made to the Index to Consolidated Financial Statements under Item 8 in Part II of this Form 10-K.(2) Financial Statement Schedules:NOTE: All schedules have been omitted because they are either not required or the information is included in thefinancial statements and notes thereto.(3) Exhibits:The exhibits listed below are required by Item 601 of Regulation S-K. Each management contract or compensatory plan orarrangement required to be filed as an exhibit to this Form 10-K has been identified. ExhibitNumber Notes Description of Document 3(i) (13) Restated Certificate of Incorporation of the Registrant. 3(ii) (13) Certificate of Amendment to Restated Certificate of Incorporation of Registrant. 3(iii) (13) Certificate of Amendment to the Restated Certificate of Incorporation, as amended, of Registrant. 3(iv) Certificate of Amendment to the Restated Certificate of Incorporation, as amended, of Registrant. 3(v) (28) Amended and Restated Bylaws of the Registrant, as amended. 3(vi) (13) Amended and Restated Operating Agreement of Heska Imaging US, LLC. 10.1* 1997 Stock Incentive Plan of Registrant, as amended and restated. 10.2* 1997 Stock Incentive Plan Restricted Stock Grant Agreement. 10.3* 1997 Stock Incentive Plan Restricted Stock Grant Agreement (Management Incentive Plan Award). 10.4* 1997 Stock Incentive Plan Restricted Stock Grant Agreement (Outside Director Award). 10.5* 1997 Stock Incentive Plan Employees and Consultants Option Agreement. 10.6* 1997 Stock Incentive Plan Outside Directors Option Agreement. 10.7* (9) 2003 Equity Incentive Plan, as amended and restated. 10.8* 2003 Equity Incentive Plan Restricted Stock Grant Agreement. 10.9* 2003 Equity Incentive Plan Restricted Stock Grant Agreement (Management Incentive Plan Award). 10.10* 2003 Equity Incentive Plan Restricted Stock Grant Agreement (Outside Director Award). 10.11* 2003 Equity Incentive Plan Employees and Consultants Option Agreement. 10.12* 2003 Equity Incentive Plan Outside Directors Option Agreement.-77-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.13* (21) 1997 Employee Stock Purchase Plan of Registrant, as amended and restated. 10.14* (20) Amended and Restated Management Incentive Plan Master Document. 10.15* Director Compensation Policy. 10.16* (7) Form of Indemnification Agreement entered into between Registrant and its directors and certainofficers. 10.17* (17) Employment Agreement between Registrant and Kevin S. Wilson, effective as of March 26, 2014. 10.18* (17) Restricted Stock Grant Agreement between Registrant and Kevin S. Wilson, effective as of March 26,2014. 10.19* (20) Restricted Stock Grant Agreement between Heska Corporation and Kevin S. Wilson, effective as ofMay 6, 2014. 10.20* (3) Employment Agreement between Registrant and Jason A. Napolitano, effective as of May 6, 2002. 10.21* (7) Amendment to Employment Agreement between Registrant and Jason A. Napolitano, effective as ofJanuary 1, 2008. 10.22* (6) Employment Agreement between Diamond Animal Health, Inc. and Michael J. McGinley, effective asof May 1, 2000. 10.23* (7) Amendment to Employment Agreement between Diamond Animal Health, Inc. and Michael J.McGinley, effective as of January 1, 2008. 10.24* (10) Assignment and Second Amendment to Employment Agreement between Registrant and Michael J.McGinley, effective as of August 4, 2011. 10.25* (6) Employment Agreement between Registrant and Nancy Wisnewski, effective as of April 15, 2002. 10.26* (7) Amendment to Employment Agreement between Registrant and Nancy Wisnewski, effective as ofJanuary 1, 2008. 10.27* (17) Employment Agreement between Registrant and Steven M. Eyl, effective as of May 15, 2013. 10.28* (13) Employment Agreement between Registrant and Steven M. Asakowicz, effective as of February 22,2013. 10.29* (20) Amendment to Employment Agreement between Registrant and Steven M. Asakowicz, effective as ofMarch 1, 2015. 10.30* (13) Employment Agreement between Registrant and Rodney A. Lippincott, effective as of February 22,2013. 10.31* (20) Amendment to Employment Agreement between Registrant and Rodney A. Lippincott, effective as ofMarch 1, 2015. 10.32* (25) Employment Agreement between Registrant and John McMahon, effective as of October 14, 2015. 10.33 (4) Net Lease Agreement between Registrant and CCMRED 40, LLC, effective as of May 24, 2004. 10.34 (5) First Amendment to Net Lease Agreement and Development Agreement between Registrant andCCMRED 40, LLC, dated February 11, 2005. 10.35 (5) Second Amendment to Net Lease Agreement between Registrant and CCMRED 40, LLC, dated July14, 2005. 10.36 (12) Third Amendment to Net Lease Agreement between Registrant and Millbrae Square Company, effectiveas of January 1, 2010. 10.37+ (6) Third Amended and Restated Credit and Security Agreement between Registrant, Diamond AnimalHealth, Inc. and Wells Fargo Business Credit, Inc., dated December 30, 2005.-78-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.38+ (7) First Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 5, 2006. 10.39+ (7) Second Amendment to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated July 20,2007. 10.40 (7) Third Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 21, 2007. 10.41+ (8) Fourth and Fifth Amendments to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated October16, 2008. 10.42+ (9) Sixth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 30, 2008. 10.43+ (11) Seventh Amendment to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated November30, 2009. 10.44+ (11) Eighth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 15, 2010. 10.45+ (12) Ninth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 21, 2011. 10.46+ (12) Tenth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated February 9, 2012. 10.47+ (13) Eleventh Amendment to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated November5, 2012. 10.48+ (16) Twelfth Amendment to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, NationalAssociation, dated August 13, 2013. 10.49+ (19) Letter Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, National Association,dated September 17, 2014. 10.50+ (25) Thirteenth Amendment to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, NationalAssociation, dated December 21, 2015. 10.51+ (28) Fourteenth Amendment to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, NationalAssociation, dated August 31, 2016. 10.52+ (28) Letter Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, National Association,dated October 25, 2016. 10.53+ (1) Product Supply Agreement between Registrant and Quidel Corporation, effective as of July 3, 1997. 10.54+ (2) First Amendment to Product Supply Agreement between Registrant and Quidel Corporation, effectiveas of March 15, 1999. 10.55 (9) Letter Amendment to Product Supply Agreement between Registrant and Quidel Corporation dated July7, 2004.-79-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.56+ (6) Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of June 17,2003; Letter Amendment to Supply and Distribution Agreement between Registrant and Boule MedicalAB, dated June 1, 2004; and Letter Amendment to Supply and Distribution Agreement betweenRegistrant and Boule Medical AB, dated December 31, 2004. 10.57+ (8) Letter Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB,dated July 12, 2005; Letter Amendment to Supply and Distribution Agreement between Registrant andBoule Medical AB, dated March 20, 2007; Letter Amendment to Supply and Distribution Agreementbetween Registrant and Boule Medical AB, dated January 23, 2008; and Sixth Amendment to Supplyand Distribution Agreement between Registrant and Boule Medical AB, effective as of October 1, 2008. 10.58+ (10) Seventh Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB,effective as of June 1, 2011. 10.59+ (14) Eighth Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB,effective as of January 1, 2013. 10.60+ (18) Ninth Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB,effective as of January 1, 2014; and Tenth Amendment to Supply and Distribution Agreement betweenRegistrant and Boule Medical AB, effective as of July 11, 2014. 10.61+ (6) Supply and License Agreement between Registrant and Schering-Plough Animal Health Corporation,effective as of August 1, 2003. 10.62+ (9) Amendment No. 1 to Supply and License Agreement between Registrant and Schering-Plough AnimalHealth Corporation, effective as of August 31, 2005. 10.63+ (13) Amendment No. 2 to Supply and License Agreement between Registrant and Intervet Inc., d/b/a MerckAnimal Health, effective as of December 7, 2011. 10.64+ (16) Amendment No. 3 to Supply and License Agreement between Registrant and Intervet Inc., d/b/a MerckAnimal Health, effective as of July 30, 2013. 10.65+ (17) Amendment No. 4 to Supply and License Agreement between Registrant and Intervet Inc., d/b/a MerckAnimal Health, effective as of December 9, 2013. 10.66+ (26) Amendment No. 5 to Supply and License Agreement between Registrant and Intervet Inc., d.b.a. MerckAnimal Health, effective as of October 30, 2015. 10.67+ (18) Clinical Chemistry Analyzer Agreement between Registrant and FUJIFILM Corporation, effective as ofJanuary 30, 2007; and First Amendment to Clinical Chemistry Analyzer Agreement, effective as ofApril 1, 2014. 10.68 (21) Second Amendment to Clinical Chemistry Analyzer Agreement, effective as of April 1, 2015. 10.73+ (13) Amended and Restated Master License Agreement between Heska Imaging US, LLC and Cuattro, LLC,effective as of February 22, 2013. 10.74 (27) Assignment and Assumption Agreement (License Agreement) between Heska Imaging US, LLC, HeskaImaging Global, LLC, Cuattro, LLC, and Heska Imaging International, LLC, dated as of March 14,2016. 10.75+ (13) Supply Agreement between Cuattro, LLC and Heska Imaging US, LLC effective as of February 24,2013. 10.76 (23) First Amendment to Supply Agreement between Heska Imaging US, LLC and Cuattro, LLC, effectiveas of August 10, 2015. 10.77 (27) Assignment and Assumption Agreement (Supply Agreement) between Heska Imaging US, LLC, HeskaImaging Global, LLC, Cuattro, LLC, and Heska Imaging International, LLC, dated as of March 14,2016.-80-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.78+ (15) Asset Purchase and License Agreement between Diamond Animal Health, Inc., and Elanco AnimalHealth, a division of Eli Lilly and Company effective as of June 17, 2013. 10.79+ (22) Master Supply Agreement between Diamond Animal Health, Inc. and Eli Lilly and Company and itsAffiliates, operating through its Elanco Animal Health division, effective as of October 1, 2014. 10.80+ (22) Supplemental Agreement between Diamond Animal Health, Inc. and Eli Lilly and Company and itsAffiliates, operating through its Elanco Animal Health division, effective as of October 1, 2014. 10.81+ (25) Agreement and Plan of Merger among Heska Corporation, Cuattro Veterinary, LLC, Kevin S. Wilson,Cuattro LLC, Lane Naffziger, Clint Roth, DVM and Doug G. Wilson, III, dated as of March 14, 2016. 10.82 (24) Letter Agreement between Heska Imaging US, LLC and Cuattro Veterinary, LLC, dated as of March 14,2016. 21.1 Subsidiaries of the Company. 23.1 Consent of EKS&H LLLP, Independent Registered Public Accounting Firm. 24.1 Power of Attorney (See Signature Page of this Form 10-K). 31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the SecuritiesExchange Act of 1934, as amended. 31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the SecuritiesExchange Act of 1934, as amended. 32.1** Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS XBRL Instance Document. 101.SCH XBRL Taxonomy Extension Schema Document. 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. 101.LAB XBRL Taxonomy Extension Label Linkbase Document.-81-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Notes *Indicates management contract or compensatory plan or arrangement.+Portions of the exhibit have been omitted pursuant to a request for confidential treatment.**Furnished herewith but not filed.(1)Filed with the Registrant's Form 10-Q for the quarter ended September 30, 1997.(2)Filed with the Registrant's Form 10-K for the year ended December 31, 2001.(3)Filed with the Registrant's Form 10-K for the year ended December 31, 2002.(4)Filed with the Registrant's Form 10-K for the year ended December 31, 2004.(5)Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2005.(6)Filed with the Registrant's Form 10-K for the year ended December 31, 2006.(7)Filed with the Registrant's Form 10-K for the year ended December 31, 2007.(8)Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2008.(9)Filed with the Registrant's Form 10-K for the year ended December 31, 2008.(10)Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2011.(11)Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2011.(12)Filed with the Registrant's Form 10-K for the year ended December 31, 2011.(13)Filed with the Registrant's Form 10-K for the year ended December 31, 2012.(14)Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2013.(15)Filed with the Registrant's Form 8-K/A on August 29, 2013.(16)Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2013.(17)Filed with the Registrant's Form 10-K for the year ended December 31, 2013.(18)Filed with the Registrants' Form 10-Q for the quarter ended June 30, 2014.(19)Filed with the Registrants' Form 10-Q for the quarter ended September 30, 2014.(20)Filed with the Registrants' Form 10-K for the year ended December 31, 2014.(21)Filed with the Registrants' Form 10-Q for the quarter ended March 31, 2015.(22)Filed with the Registrants' Form 10-Q for the quarter ended June 30, 2015.(23)Filed with the Registrants' Form 10-Q for the quarter ended September 30, 2015.(24)Filed with the Registrants' Form 8-K on March 15, 2016.(25)Filed with the Registrants' Form 10-K for the year ended December 31, 2015.(26)Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2016.(27)Filed with the Registrants' Form 10-Q for the quarter ended June 30, 2016.(28)Filed with the Registrants' Form 10-Q for the quarter ended September 30, 2016.-82-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Item 16.Form 10-K SummaryRegistrants may voluntarily include a summary of information required by Form 10-K under this item 16. The Registrant haselected not to include such summary information.-83-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized, on March 3, 2017. HESKA CORPORATION By: /s/ KEVIN S. WILSON Kevin S. WilsonChief Executive Officer and President POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints JohnMcMahon his or her true and lawful attorneys-in-fact, with full power of substitution, for him or her in any and all capacities, to signany amendments to this report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith,with the Securities and Exchange Commission, hereby ratifying and confirming all of said attorney-in-fact or their substitute may do orcause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of the Registrant and in the capacities and on the dates indicated: SignatureTitleDate/s/ KEVIN S. WILSONKevin S. WilsonChief Executive Officer, President and Director(Principal Executive Officer)March 3, 2017/s/ JOHN MCMAHONJohn McMahonVice President, Chief Financial Officer (PrincipalFinancial and Accounting Officer)March 3, 2017/s/ SHARON L. LARSONSharon L. LarsonChairMarch 3, 2017/s/ G. IRWIN GORDONG. Irwin GordonDirectorMarch 3, 2017/s/ BONNIE J. TROWBRIDGEBonnie J. TrowbridgeDirectorMarch 3, 2017/s/ DAVID E. SVEENDavid E. Sveen, Ph.D.DirectorMarch 3, 2017/s/ CAROL A. WRENNCarol A. WrennDirectorMarch 3, 2017-84-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit Index ExhibitNumber Notes Description of Document 3(i) (13) Restated Certificate of Incorporation of the Registrant. 3(ii) (13) Certificate of Amendment to Restated Certificate of Incorporation of Registrant. 3(iii) (13) Certificate of Amendment to the Restated Certificate of Incorporation, as amended, of Registrant. 3(iv) Certificate of Amendment to the Restated Certificate of Incorporation, as amended, of Registrant. 3(v) (28) Amended and Restated Bylaws of the Registrant, as amended. 3(vi) (13) Amended and Restated Operating Agreement of Heska Imaging US, LLC. 10.1* 1997 Stock Incentive Plan of Registrant, as amended and restated. 10.2* 1997 Stock Incentive Plan Restricted Stock Grant Agreement. 10.3* 1997 Stock Incentive Plan Restricted Stock Grant Agreement (Management Incentive Plan Award). 10.4* 1997 Stock Incentive Plan Restricted Stock Grant Agreement (Outside Director Award). 10.5* 1997 Stock Incentive Plan Employees and Consultants Option Agreement. 10.6* 1997 Stock Incentive Plan Outside Directors Option Agreement. 10.7* (9) 2003 Equity Incentive Plan, as amended and restated. 10.8* 2003 Equity Incentive Plan Restricted Stock Grant Agreement. 10.9* 2003 Equity Incentive Plan Restricted Stock Grant Agreement (Management Incentive Plan Award). 10.10* 2003 Equity Incentive Plan Restricted Stock Grant Agreement (Outside Director Award). 10.11* 2003 Equity Incentive Plan Employees and Consultants Option Agreement. 10.12* 2003 Equity Incentive Plan Outside Directors Option Agreement. 10.13* (21) 1997 Employee Stock Purchase Plan of Registrant, as amended and restated. 10.14* (20) Amended and Restated Management Incentive Plan Master Document. 10.15* Director Compensation Policy. 10.16* (7) Form of Indemnification Agreement entered into between Registrant and its directors and certainofficers. 10.17* (17) Employment Agreement between Registrant and Kevin S. Wilson, effective as of March 26, 2014. 10.18* (17) Restricted Stock Grant Agreement between Registrant and Kevin S. Wilson, effective as of March 26,2014. 10.19* (20) Restricted Stock Grant Agreement between Heska Corporation and Kevin S. Wilson, effective as ofMay 6, 2014. 10.20* (3) Employment Agreement between Registrant and Jason A. Napolitano, effective as of May 6, 2002. 10.21* (7) Amendment to Employment Agreement between Registrant and Jason A. Napolitano, effective as ofJanuary 1, 2008. 10.22* (6) Employment Agreement between Diamond Animal Health, Inc. and Michael J. McGinley, effective asof May 1, 2000.-85-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.23* (7) Amendment to Employment Agreement between Diamond Animal Health, Inc. and Michael J.McGinley, effective as of January 1, 2008. 10.24* (10) Assignment and Second Amendment to Employment Agreement between Registrant and Michael J.McGinley, effective as of August 4, 2011. 10.25* (6) Employment Agreement between Registrant and Nancy Wisnewski, effective as of April 15, 2002. 10.26* (7) Amendment to Employment Agreement between Registrant and Nancy Wisnewski, effective as ofJanuary 1, 2008. 10.27* (17) Employment Agreement between Registrant and Steven M. Eyl, effective as of May 15, 2013. 10.28* (13) Employment Agreement between Registrant and Steven M. Asakowicz, effective as of February 22,2013. 10.29* (20) Amendment to Employment Agreement between Registrant and Steven M. Asakowicz, effective as ofMarch 1, 2015. 10.30* (13) Employment Agreement between Registrant and Rodney A. Lippincott, effective as of February 22,2013. 10.31* (20) Amendment to Employment Agreement between Registrant and Rodney A. Lippincott, effective as ofMarch 1, 2015. 10.32* (25) Employment Agreement between Registrant and John McMahon, effective as of October 14, 2015. 10.33 (4) Net Lease Agreement between Registrant and CCMRED 40, LLC, effective as of May 24, 2004. 10.34 (5) First Amendment to Net Lease Agreement and Development Agreement between Registrant andCCMRED 40, LLC, dated February 11, 2005. 10.35 (5) Second Amendment to Net Lease Agreement between Registrant and CCMRED 40, LLC, dated July14, 2005. 10.36 (12) Third Amendment to Net Lease Agreement between Registrant and Millbrae Square Company, effectiveas of January 1, 2010. 10.37+ (6) Third Amended and Restated Credit and Security Agreement between Registrant, Diamond AnimalHealth, Inc. and Wells Fargo Business Credit, Inc., dated December 30, 2005. 10.38+ (7) First Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 5, 2006. 10.39+ (7) Second Amendment to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated July 20,2007. 10.40 (7) Third Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 21, 2007. 10.41+ (8) Fourth and Fifth Amendments to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated October16, 2008. 10.42+ (9) Sixth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 30, 2008. 10.43+ (11) Seventh Amendment to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated November30, 2009.-86-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.44+ (11) Eighth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 15, 2010. 10.45+ (12) Ninth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated December 21, 2011. 10.46+ (12) Tenth Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated February 9, 2012. 10.47+ (13) Eleventh Amendment to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc. and Wells Fargo Bank, National Association, dated November5, 2012. 10.48+ (16) Twelfth Amendment to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, NationalAssociation, dated August 13, 2013. 10.49+ (19) Letter Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, National Association,dated September 17, 2014. 10.50+ (25) Thirteenth Amendment to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, NationalAssociation, dated December 21, 2015. 10.51+ (28) Fourteenth Amendment to Third Amended and Restated Credit and Security Agreement betweenRegistrant, Diamond Animal Health, Inc, Heska Imaging US, LLC and Wells Fargo Bank, NationalAssociation, dated August 31, 2016. 10.52+ (28) Letter Amendment to Third Amended and Restated Credit and Security Agreement between Registrant,Diamond Animal Health, Inc., Heska Imaging US, LLC and Wells Fargo Bank, National Association,dated October 25, 2016. 10.53+ (1) Product Supply Agreement between Registrant and Quidel Corporation, effective as of July 3, 1997. 10.54+ (2) First Amendment to Product Supply Agreement between Registrant and Quidel Corporation, effectiveas of March 15, 1999. 10.55 (9) Letter Amendment to Product Supply Agreement between Registrant and Quidel Corporation dated July7, 2004. 10.56+ (6) Supply and Distribution Agreement between Registrant and Boule Medical AB, effective as of June 17,2003; Letter Amendment to Supply and Distribution Agreement between Registrant and Boule MedicalAB, dated June 1, 2004; and Letter Amendment to Supply and Distribution Agreement betweenRegistrant and Boule Medical AB, dated December 31, 2004. 10.57+ (8) Letter Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB,dated July 12, 2005; Letter Amendment to Supply and Distribution Agreement between Registrant andBoule Medical AB, dated March 20, 2007; Letter Amendment to Supply and Distribution Agreementbetween Registrant and Boule Medical AB, dated January 23, 2008; and Sixth Amendment to Supplyand Distribution Agreement between Registrant and Boule Medical AB, effective as of October 1, 2008. 10.58+ (10) Seventh Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB,effective as of June 1, 2011. 10.59+ (14) Eighth Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB,effective as of January 1, 2013.-87-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.60+ (18) Ninth Amendment to Supply and Distribution Agreement between Registrant and Boule Medical AB,effective as of January 1, 2014; and Tenth Amendment to Supply and Distribution Agreement betweenRegistrant and Boule Medical AB, effective as of July 11, 2014. 10.61+ (6) Supply and License Agreement between Registrant and Schering-Plough Animal Health Corporation,effective as of August 1, 2003. 10.62+ (9) Amendment No. 1 to Supply and License Agreement between Registrant and Schering-Plough AnimalHealth Corporation, effective as of August 31, 2005. 10.63+ (13) Amendment No. 2 to Supply and License Agreement between Registrant and Intervet Inc., d/b/a MerckAnimal Health, effective as of December 7, 2011. 10.64+ (16) Amendment No. 3 to Supply and License Agreement between Registrant and Intervet Inc., d/b/a MerckAnimal Health, effective as of July 30, 2013. 10.65+ (17) Amendment No. 4 to Supply and License Agreement between Registrant and Intervet Inc., d/b/a MerckAnimal Health, effective as of December 9, 2013. 10.66+ (26) Amendment No. 5 to Supply and License Agreement between Registrant and Intervet Inc., d.b.a. MerckAnimal Health, effective as of October 30, 2015. 10.67+ (18) Clinical Chemistry Analyzer Agreement between Registrant and FUJIFILM Corporation, effective as ofJanuary 30, 2007; and First Amendment to Clinical Chemistry Analyzer Agreement, effective as ofApril 1, 2014. 10.68 (21) Second Amendment to Clinical Chemistry Analyzer Agreement, effective as of April 1, 2015. 10.73+ (13) Amended and Restated Master License Agreement between Heska Imaging US, LLC and Cuattro, LLC,effective as of February 22, 2013. 10.74 (27) Assignment and Assumption Agreement (License Agreement) between Heska Imaging US, LLC, HeskaImaging Global, LLC, Cuattro, LLC, and Heska Imaging International, LLC, dated as of March 14,2016. 10.75+ (13) Supply Agreement between Cuattro, LLC and Heska Imaging US, LLC effective as of February 24,2013. 10.76 (23) First Amendment to Supply Agreement between Heska Imaging US, LLC and Cuattro, LLC, effectiveas of August 10, 2015. 10.77 (27) Assignment and Assumption Agreement (Supply Agreement) between Heska Imaging US, LLC, HeskaImaging Global, LLC, Cuattro, LLC, and Heska Imaging International, LLC, dated as of March 14,2016. 10.78+ (15) Asset Purchase and License Agreement between Diamond Animal Health, Inc., and Elanco AnimalHealth, a division of Eli Lilly and Company effective as of June 17, 2013. 10.79+ (22) Master Supply Agreement between Diamond Animal Health, Inc. and Eli Lilly and Company and itsAffiliates, operating through its Elanco Animal Health division, effective as of October 1, 2014. 10.80+ (22) Supplemental Agreement between Diamond Animal Health, Inc. and Eli Lilly and Company and itsAffiliates, operating through its Elanco Animal Health division, effective as of October 1, 2014. 10.81+ (25) Agreement and Plan of Merger among Heska Corporation, Cuattro Veterinary, LLC, Kevin S. Wilson,Cuattro LLC, Lane Naffziger, Clint Roth, DVM and Doug G. Wilson, III, dated as of March 14, 2016. 10.82 (24) Letter Agreement between Heska Imaging US, LLC and Cuattro Veterinary, LLC, dated as of March 14,2016. 21.1 Subsidiaries of the Company. 23.1 Consent of EKS&H LLLP, Independent Registered Public Accounting Firm. 24.1 Power of Attorney (See Signature Page of this Form 10-K).-88-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the SecuritiesExchange Act of 1934, as amended. 31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the SecuritiesExchange Act of 1934, as amended. 32.1** Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS XBRL Instance Document. 101.SCH XBRL Taxonomy Extension Schema Document. 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. 101.LAB XBRL Taxonomy Extension Label Linkbase Document.-89-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Notes *Indicates management contract or compensatory plan or arrangement.+Portions of the exhibit have been omitted pursuant to a request for confidential treatment.**Furnished herewith but not filed.(1)Filed with the Registrant's Form 10-Q for the quarter ended September 30, 1997.(2)Filed with the Registrant's Form 10-K for the year ended December 31, 2001.(3)Filed with the Registrant's Form 10-K for the year ended December 31, 2002.(4)Filed with the Registrant's Form 10-K for the year ended December 31, 2004.(5)Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2005.(6)Filed with the Registrant's Form 10-K for the year ended December 31, 2006.(7)Filed with the Registrant's Form 10-K for the year ended December 31, 2007.(8)Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2008.(9)Filed with the Registrant's Form 10-K for the year ended December 31, 2008.(10)Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2011.(11)Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2011.(12)Filed with the Registrant's Form 10-K for the year ended December 31, 2011.(13)Filed with the Registrant's Form 10-K for the year ended December 31, 2012.(14)Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2013.(15)Filed with the Registrant's Form 8-K/A on August 29, 2013.(16)Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2013.(17)Filed with the Registrant's Form 10-K for the year ended December 31, 2013.(18)Filed with the Registrants' Form 10-Q for the quarter ended June 30, 2014.(19)Filed with the Registrants' Form 10-Q for the quarter ended September 30, 2014.(20)Filed with the Registrants' Form 10-K for the year ended December 31, 2014.(21)Filed with the Registrants' Form 10-Q for the quarter ended March 31, 2015.(22)Filed with the Registrants' Form 10-Q for the quarter ended June 30, 2015.(23)Filed with the Registrants' Form 10-Q for the quarter ended September 30, 2015.(24)Filed with the Registrants' Form 8-K on March 15, 2016.(25)Filed with the Registrants' Form 10-K for the year ended December 31, 2015.(26)Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2016.(27)Filed with the Registrants' Form 10-Q for the quarter ended June 30, 2016.(28)Filed with the Registrants' Form 10-Q for the quarter ended September 30, 2016.-90-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 3(iv)CERTIFICATE OF AMENDMENTTO THERESTATED CERTIFICATE OF INCORPORATION, AS AMENDED,OFHESKA CORPORATIONHeska Corporation (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State ofDelaware (the "DGCL"), does hereby certify:1.This Certificate of Amendment to the Corporation’s Restated Certificate of Incorporation, as amended (the "Certificate"), has been dulyadopted 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 inits entirety and substituting therefore a new Paragraph A of Article IV, to read in its entirety as follows:A.Authorized Stock. The total authorized stock of the Corporation, which shall be an aggregate of 20,500,000 shares, shall consist of threeclasses: (i) a first class consisting of 9,000,000 shares of Traditional Common Stock having a par value of $0.01 per share (the "OriginalCommon Stock"); (ii) a second class consisting of 9,000,000 shares of Public Common Stock having a par value of $0.01 per share (the"Common Stock" or "NOL Restricted Common Stock" and, together with the Original Common Stock, the "Common Stock Securities");and (iii) a third class consisting of 2,500,000 shares of Preferred Stock having a par value of $0.01 per share (the "Preferred Stock").3.This Certificate of Amendment shall become effective at the time this Certificate of Amendment to the Restated Certificate ofIncorporation, as amended, is filed with the Secretary of State of the State of Delaware.IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed by a duly authorized officer on this 13th day ofMay, 2016. Heska Corporation By:/s/ Jason A. Napolitano Name:Jason A. Napolitano Title:Chief Operating Officer, Chief Financial Officer, Executive VicePresident and Secretary Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.1AMENDED AND RESTATED 1997 STOCK INCENTIVE PLANSource: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Heska Corporation1997 Stock Incentive PlanMost Recently Amended and Restated effective March 28, 2016Table of ContentsARTICLE 1. INTRODUCTION4 ARTICLE 2. ADMINISTRATION42.1Committee Composition42.2Committee Responsibilities5 ARTICLE 3. SHARES AVAILABLE FOR GRANTS53.1Basic Limitation53.2Additional Shares5 ARTICLE 4. ELIGIBILITY54.1Nonstatutory Stock Options and Restricted Shares54.2Incentive Stock Options6 ARTICLE 5. OPTIONS65.1Stock Option Agreement65.2Number of Shares65.3Exercise Price65.4Exercisability and Term65.5Effect of Change in Control65.6Modification or Assumption of Options75.7Buyout Provisions7 ARTICLE 6. PAYMENT FOR OPTION SHARES76.1General Rule76.2Surrender of Stock76.3Exercise/Sale76.4[Reserved]76.5[Reserved]76.6Other Forms of Payment8 ARTICLE 7. CLAWBACK8 ARTICLE 8. RESTRICTED SHARES88.1Time, Amount and Form of Awards88.2Payment for Awards88.3Vesting Conditions88.4Voting and Dividend Rights98.5Section 162(m) Performance Restrictions98.6Minimum Vesting Requirement11 Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ARTICLE 9. PROTECTION AGAINST DILUTION119.1Adjustments119.2Dissolution or Liquidation129.3Reorganizations12 ARTICLE 10. AWARDS UNTER OTHER PLANS12 ARTICLE 11. LIMITATION ON RIGHTS1211.1Retention Rights1211.2Stockholders' Rights1211.3Regulatory Requirements13 ARTICLE 12. WITHHOLDING TAXES; PARACHUTE PAYMENTS1312.1General1312.2Section 280G13 ARTICLE 13. FUTURE OF THE PLAN1413.1Term of the Plan1413.2Performance Awards14 ARTICLE 14. DEFINITIONS14 ARTICLE 15. EXECUTION16Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.HESKA CORPORATION1997 STOCK INCENTIVE PLANMost Recently Amended and Restated Effective March 28, 2016ARTICLE 1.INTRODUCTIONThe Plan was originally adopted by the Board effective March 15, 1997, and was subsequently amended and/or restated as ofMarch 6, 2007, May 5, 2009, February 22, 2012, March 25, 2014, and May 6, 2014. The number of Common Shares available forissuance and subject to Awards under the Plan was adjusted in connection with completion of the Company's 1-for-10 Reverse StockSplit on December 30, 2010. Effective March 28, 2016, the Board hereby adopts this amended and restated plan subject to stockholderapproval. If stockholder approval is not obtained within 12 months, this amended and restated plan will be of no further effect and theform of the Plan as of May 6, 2014 will be effective in accordance with its terms.The purpose of the Plan is to promote the long-term success of the Company and the creation of stockholder value by (a)encouraging Employees, Outside Directors and Consultants to focus on critical long-range objectives, (b) encouraging the attractionand retention of Employees, Outside Directors and Consultants with exceptional qualifications and (c) linking Employees, OutsideDirectors and Consultants directly to stockholder interests through increased stock ownership. The Plan seeks to achieve this purposeby providing for Awards in the form of Restricted Shares or Options (which may constitute incentive stock options or nonstatutorystock options).The Plan shall be governed by, and construed in accordance with, the laws of the State of Colorado (except its choice-of-lawprovisions).ARTICLE 2.ADMINISTRATION.2.1COMMITTEE COMPOSITION. The Plan shall be administered by the Committee. The Committee shall consist exclusively oftwo or more directors of the Company, who shall be appointed by the Board. In addition, the composition of the Committeeshall satisfy:(a)Such requirements as the Securities and Exchange Commission may establish for administrators acting under plansintended 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 toqualify for exemption under section 162(m)(4)(C) of the Code.The Board may also appoint one or more separate committees of the Board, each composed of one or more directors of theCompany who need not satisfy the foregoing requirements, who may administer the Plan with respect to Employees andConsultants who are not considered officers or directors of the Company under section 16 of the Exchange Act, may grantAwards under the Plan to such Employees and Consultants and may determine all terms of such Awards.-4-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.2.2COMMITTEE RESPONSIBILITIES. The Committee shall (a) select the Employees, Outside Directors and Consultants whoare to receive Awards under the Plan, (b) determine the type, number, vesting requirements and other features and conditions ofsuch Awards, (c) interpret the Plan and (d) make all other decisions relating to the operation of the Plan. The Committee mayadopt such rules or guidelines as it deems appropriate to implement the Plan. The Committee may amend or modify anyoutstanding Awards in any manner to the extent the Committee would have had the authority under the Plan initially to makesuch Awards as so amended or modified. The Committee's determinations under the Plan shall be final and binding on allpersons.ARTICLE 3.SHARES AVAILABLE FOR GRANTS.3.1BASIC 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 shares stated in this Section 3.1 as available for the grantof Awards is subject to adjustment in accordance with Article 9. As of March 27, 2016, the aggregate number of CommonShares cumulatively authorized by the Company's stockholders for issuance as Options and Restricted Shares under the Planwas 2,135,130. Of that total, as of March 27, 2016, Previously Issued Awards have been issued covering 2,103,899 CommonShares, leaving 31,231 Common Shares for the issuance of Options and Restricted Shares. Common Shares underlyingPreviously Issued Awards as of March 27, 2016 consisted of 316,666 Restricted Shares which were not subject to furthervesting conditions, 370,625 Common Shares issued pursuant to the exercise of ISOs, 480,517 Common Shares issued pursuantto the exercise of NQOs, 117,677 Restricted Shares subject to further vesting conditions, 572,234 Common Shares underlyingoutstanding ISOs and 246,180 Common Shares underlying outstanding NQOs. With this amendment and restatement of thePlan, the Company's Board and stockholders have approved an increase of 500,000 in the aggregate number of CommonShares available for Awards under the Plan, to a new total of 2,635,130. Assuming no Unexercised/Unvested Awardsoutstanding as of March 27, 2016 are exercised, if applicable, or vest, the total number of Common Shares that may be grantedunderlying ISOs is 1,467,322. Assuming all Unexercised/Unvested Awards outstanding as of March 27, 2016 vest and areexercised, if applicable, the total number Common Shares that may be granted underlying ISOs is 531,231.3.2ADDITIONAL SHARES. Any shares of Common Stock subject to an Award that is canceled, forfeited or expires prior toexercise or realization, either in full or in part, shall again become available for issuance under the Plan as ISOs or any type ofAward. Notwithstanding anything to the contrary contained herein: shares subject to an Award under the Plan shall not again bemade available for issuance or delivery under the Plan if such shares are (a) shares tendered in payment of an Option, or (b)shares delivered or withheld by the Company to satisfy any tax withholding obligation.ARTICLE 4.ELIGIBILITY.4.1NONSTATUTORY STOCK OPTIONS AND RESTRICTED SHARES. Only Employees, Outside Directors and Consultantsshall be eligible for the grant of NQOs and Restricted Shares.-5-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.4.2INCENTIVE STOCK OPTIONS. Only Employees who are common-law employees of the Company, a Parent or a Subsidiaryshall be eligible for the grant of ISOs. In addition, an Employee who owns more than 10% of the total combined voting powerof all classes of outstanding stock of the Company or any of its Parents or Subsidiaries shall not be eligible for the grant of anISO unless the requirements set forth in section 422(c)(6) of the Code are satisfied.ARTICLE 5.OPTIONS.5.1STOCK OPTION AGREEMENT. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreementbetween the Optionee and the Company. Such Option shall be subject to all applicable terms of the Plan and may be subject toany other terms that are not inconsistent with the Plan. The Stock Option Agreement shall specify whether the Option is an ISOor an NQO. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. Optionsmay be granted in consideration of a cash payment or in consideration of a reduction in the Optionee's other compensation.5.2NUMBER OF SHARES. Each Stock Option Agreement shall specify the number of Common Shares subject to the Option andshall provide for the adjustment of such number in accordance with Article 9. Options granted to any Optionee in a single fiscalyear of the Company shall not cover more than 50,000 Common Shares, except that Options granted to a new Employee in thefiscal year of the Company in which his or her service as an Employee first commences shall not cover more than 100,000Common Shares. The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 9.5.3EXERCISE PRICE. Each Stock Option Agreement shall specify the Exercise Price; provided that the Exercise Price under anISO shall in no event be less than 100% of the Fair Market Value of a Common Share on the date of grant and the ExercisePrice under an NQO shall in no event be less than 85% of the Fair Market Value of a Common Share on the date of grant. In thecase of an NQO, a Stock Option Agreement may specify an Exercise Price that varies in accordance with a predeterminedformula while the NQO is outstanding.5.4EXERCISABILITY AND TERM. Each Stock Option Agreement shall specify the date when all or any installment of theOption is to become exercisable. The Stock Option Agreement shall also specify the term of the Option; provided that the termof an ISO shall in no event exceed 10 years from the date of grant. A Stock Option Agreement may provide for acceleratedexercisability in the event of the Optionee's death, disability or retirement or other events and may provide for expiration priorto the end of its term in the event of the termination of the Optionee's service. NQOs may also be awarded in combination withRestricted Shares, and such an Award may provide that the NQOs will not be exercisable unless the related Restricted Shares areforfeited.5.5EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the time of granting an Option or thereafter, thatsuch Option shall become exercisable as to all or part of the Common Shares subject to such Option in the event that a Changein Control occurs with respect to the Company, provided, however, that in the case of an ISO, the acceleration of exercisabilityshall not occur without the Optionee's written consent.-6-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.5.6MODIFICATION OR ASSUMPTION OF OPTIONS.. The Committee may modify, extend or assume outstanding options ormay accept the cancellation of outstanding options (whether granted by the Company or by another issuer) in return for thegrant of new options for the same or a different number of shares and at the same or a different exercise price. The foregoingnotwithstanding, no modification of an Option shall, without the consent of the Optionee, alter or impair his or her rights orobligations under such Option (except that the Committee has the authority to amend any outstanding Option without theOptionee's consent if the Committee deems it necessary or advisable to comply with Code Section 409A). In addition, to theextent the Committee's modification of the purchase price or the exercise price of any outstanding Award effects a repricing,shareholder approval shall be required before the repricing is effective.5.7BUYOUT PROVISIONS. The Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents anOption previously granted or (b) authorize an Optionee to elect to cash out an Option previously granted, in either case at suchtime and based upon such terms and conditions as the Committee shall establish.ARTICLE 6.PAYMENT FOR OPTION SHARES.6.1GENERAL RULE. The entire Exercise Price of Common Shares issued upon exercise of Options shall be payable in cash orcash equivalents at the time when such Common Shares are purchased, except as follows:(a)In the case of an ISO granted under the Plan, payment shall be made only pursuant to the express provisions of theapplicable Stock Option Agreement. The Stock Option Agreement may specify that payment may be made in anyform(s) described in this Article 6.(b)In the case of an NQO, the Committee may at any time accept payment in any form(s) described in this Article 6.6.2SURRENDER OF STOCK. To the extent that this Section 6.2 is applicable, all or any part of the Exercise Price may be paidby surrendering Common Shares that are already owned by the Optionee. Such Common Shares shall be valued at their FairMarket Value on the date when the new Common Shares are purchased under the Plan. The Optionee shall not surrenderCommon Shares in payment of the Exercise Price if such action could cause the Company to recognize additional compensationexpense with respect to the Option for financial reporting purposes under GAAP accounting at the time of such proposedsurrender.6.3EXERCISE/SALE. To the extent that this Section 6.3 is applicable, all or any part of the Exercise Price may be paid bydelivering (on a form prescribed by the Company) an irrevocable direction to a securities broker approved by the Company tosell all or part of the Common Shares being purchased under the Plan and to deliver all or part of the sales proceeds to theCompany.6.4 [RESERVED]6.5 [RESERVED]-7-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.6.6OTHER FORMS OF PAYMENT. To the extent that this Section 6.6 is applicable, all or any part of the Exercise Price may bepaid in any other form that is consistent with applicable laws, regulations and rules.ARTICLE 7.CLAWBACK.Notwithstanding any other provisions in this Plan to the contrary, any Award received by a Subject Participant, and/or any CommonShare issued upon exercise of any Award received by a Subject Participant hereunder, and/or any amount received with respect to anysale of any such Award or Common Share, will be subject to potential cancellation, recoupment, rescission, payback or other action tothe extent required pursuant to applicable law, government regulation or national securities exchange listing requirement (or anyclawback policy adopted by the Company pursuant to any such law, government regulation or national securities exchange listingrequirement). Each Subject Participant agrees and consents to the Company's application, implementation and enforcement of anypolicy established by the Company that may apply to the Subject Participant and any provision of applicable law, governmentregulation or national securities exchange listing requirement relating to cancellation, rescission, payback or recoupment ofcompensation, and expressly agrees that the Company may take such actions as are necessary to effectuate any such policy (asapplicable to the Subject Participant) or applicable law, government regulation or national securities exchange listing requirementwithout further consent or action being required by the Subject Participant.ARTICLE 8.RESTRICTED SHARES.8.1TIME, 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 Shareswill be forfeited in the event that the related NQOs are exercised. The maximum aggregate number of Common Shares that maybe granted in the form of Restricted Shares in any one calendar year to any one Participant is 45,000, except a new Employeemay receive a grant of up to 75,000 Restricted Shares in the fiscal year of the Company in which his or her service with theCompany begins.8.2PAYMENT OF AWARDS. To the extent that an Award is granted in the form of newly issued Restricted Shares, the Awardrecipient, as a condition to the grant of such Award, shall be required to pay the Company in cash, cash equivalents or any otherform of legal consideration acceptable to the Company, including but not limited to future services, an amount equal to the parvalue of such Restricted Shares. To the extent that an Award is granted in the form of Restricted Shares from the Company'streasury, no cash consideration shall be required of the Award recipients.8.3VESTING CONDITIONS. Each Award of Restricted Shares shall be subject to vesting. Vesting shall occur, in full or ininstallments, upon satisfaction of the conditions specified in the Stock Award Agreement. A Stock Award Agreement mayprovide for accelerated vesting in the event of the Participant's death, disability or retirement or other events. Notwithstandingany other provision of the Plan to the contrary, the Committee may determine, at the time of granting Restricted Shares orthereafter, that all or part of such Restricted Shares shall become vested in the event that a Change in Control occurs withrespect to the Company.-8-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.8.4VOTING AND DIVIDEND RIGHTS. Unless otherwise provided in the Stock Award Agreement, the holder of RestrictedShares awarded under the Plan shall have the same voting, dividend and other rights as the Company's other stockholders.Without limitation, a Stock Award Agreement may require that the holders of Restricted Shares invest any cash dividendsreceived in additional Restricted Shares (in which case such additional Restricted Shares shall be subject to the same conditionsand restrictions as the Award with respect to which the dividends were paid), or may defer payment of any dividends untilvesting of the Award.8.5SECTION 162(M) PERFORMANCE RESTRICTIONS(a)In General. For purposes of qualifying grants of Restricted Shares as "performance-based compensation" under CodeSection 162(m), the Committee, in its discretion, may make Restricted Shares subject to vesting based on theachievement of performance goals, in which case the Committee will specify in writing, by resolution or otherwise, theParticipants eligible to receive such an Award (which may be expressed in terms of a class of individuals) and theperformance goals applicable to such Awards within 90 days after the commencement of the period to which theperformance goals relate, or such earlier time as required to comply with Section 162(m) of the Code. No such Awardshall be payable unless the Committee certifies in writing, by resolution or otherwise, that the performance goalsapplicable to the Award were satisfied. In no case may the Committee increase the value of an Award granted under thisSection 8.5 above the maximum value determined under the performance formula by the attainment of the applicableperformance goals, but the Committee retains the discretion to reduce the value below such maximum.(b)Performance Goals. Unless and until the Committee proposes for stockholder vote and the stockholders approve achange in the general performance measures applicable to Awards, the performance goals upon which the payment orvesting of an Award that is intended to qualify as performance based compensation are limited to the followingPerformance Measures:(1)operating income or operating profit (including but not limited to operating income and any affiliated growthmeasure);(2)net earnings or net income (before or after taxes, including but not limited to deferred taxes, and any affiliatedgrowth measure);(3)basic or diluted earnings per share (before or after taxes, including but not limited to deferred taxes, and anyaffiliated 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);-9-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(8)earnings before or after taxes, interest, depreciation and/or amortization (including but not limited to changes inthis 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 filingswith the Securities and Exchange Commission which may require stockholder approval);(27)changes in location or the opening or closing of facilities;-10-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(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 withmilestones 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).Any performance measures may be used to measure the performance of the Company as a whole and/or any one ormore business segments, regional operations, products and/or Affiliates of the Company or any combination thereof, asthe Committee may deem appropriate, and any performance measures may be used in comparison to the performance ofa group of peer companies, or a published or special index that the Committee, in its sole discretion, deems appropriate.The Committee also has the authority to provide in an Award for accelerated vesting of an Award based on theachievement of performance goals.The Committee may provide in any Award that any evaluation of attainment of a performance goal may include orexclude any of the following events that occurs during the relevant period: (a) asset write downs; (b) litigationjudgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or regulationsaffecting reported results; (d) any reorganization and/or restructuring transactions or programs; (e) extraordinarynonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management's discussion andanalysis of financial condition and results of operations appearing in the Company's Annual Report on Form 10-K forthe applicable year; and (f) acquisitions or divestitures and associated costs; (g) any other specific unusual ornonrecurring events, or objectively determinable category thereof; (h) foreign currency gains and losses; and (i) achange in the Company's fiscal year.In the event that applicable tax and/or securities laws change to permit discretion by the Committee to alter the governingperformance measures without obtaining stockholder approval of such changes, the Committee shall have sole discretion tomake such changes without obtaining stockholder approval. In addition, in the event that the Committee determines that it isadvisable to grant Awards that do not qualify as performance based compensation, the Committee may make such grantswithout satisfying the requirements of Section 162(m) of the Code.8.6MINIMUM VESTING REQUIREMENT. The minimum period for Restricted Shares granted under the Plan to vest shall beone year.ARTICLE 9.PROTECTION AGAINST DILUTION.9.1ADJUSTMENTS. In the event of a subdivision of the outstanding Common Shares, a declaration of a dividend payable inCommon Shares, a declaration of a dividend payable in a form other than Common Shares in an amount that has a materialeffect on the price of Common Shares, a combination or consolidation of the outstanding Common Shares (by reclassification orotherwise) into a lesser number of Common Shares, a recapitalization, a spin-off or a similar occurrence, the Committee shallmake such adjustments as it, in its sole discretion, deems appropriate in one or more of (a) the number of Options and RestrictedShares available for future Awards under Article 3, (b) the limitations set forth in Section 5.2 and Section 8.1, (c) the number ofCommon Shares covered by each outstanding Option or (d) the Exercise Price under each outstanding Option. Except asprovided in this Article 9, a Participant shall have no rights by reason of any issue by the Company of stock of any class orsecurities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment ofany stock dividend or any other increase or decrease in the number of shares of stock of any class.-11-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.9.2DISSOLUTION OR LIQUIDATION. To the extent not previously exercised, Options shall terminate immediately prior to thedissolution or liquidation of the Company.9.3REORGANIZATIONS. In the event that the Company is a party to a merger or other reorganization, outstanding Options andRestricted Shares shall be subject to the agreement of merger or reorganization. Such agreement may provide, withoutlimitation, for the continuation of outstanding Awards by the Company (if the Company is a surviving corporation), for theirassumption by the surviving corporation or its parent or subsidiary, for the substitution by the surviving corporation or its parentor subsidiary of its own awards for such Awards, for accelerated vesting and accelerated expiration, or for settlement in cash orcash equivalents.ARTICLE 10.AWARDS UNDER OTHER PLANS.The Company may grant awards under other plans or programs. Such awards may be settled in the form of Common Sharesissued under this Plan. Such Common Shares shall be treated for all purposes under the Plan like Restricted Shares and shall, whenissued, reduce the number of Common Shares available under Article 3.ARTICLE 11.LIMITATION ON RIGHTS.11.1RETENTION RIGHTS. Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a rightto remain an Employee, Outside Director or Consultant. The Company and its Parents, Subsidiaries and Affiliates reserve theright to terminate the service of any Employee, Outside Director or Consultant at any time, with or without cause, subject toapplicable laws, the Company's certificate of incorporation and bylaws and a written employment agreement (if any).11.2STOCKHOLDERS' RIGHTS. A Participant shall have no dividend rights, voting rights or other rights as a stockholder withrespect to any Common Shares covered by his or her Award prior to the time when a stock certificate for such Common Sharesis issued or, in the case of an Option, the time when he or she becomes entitled to receive such Common Shares by filing anotice of exercise and paying the Exercise Price. No adjustment shall be made for cash dividends or other rights for which therecord date is prior to such time, except as expressly provided in the Plan.-12-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.11.3REGULATORY REQUIREMENTS. Any other provision of the Plan notwithstanding, the obligation of the Company to issueCommon Shares under the Plan shall be subject to all applicable laws, rules and regulations and such approval by anyregulatory body as may be required. The Company reserves the right to restrict, in whole or in part, the delivery of CommonShares 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.ARTICLE 12.WITHHOLDING TAXES; Parachute payments.12.1GENERAL. To the extent provided by the terms of an Award Agreement and subject to the discretion of the Committee, theParticipant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of CommonStock under an Award by any of the following means (in addition to the Company's right to withhold from any compensationpaid to the Participant by the Company) or by a combination of such means: (a) tendering a cash payment; (b) authorizing theCompany to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as aresult of the exercise or acquisition of Common Stock under the Award, provided, however, that no shares of Common Stockare withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (c) delivering to theCompany previously owned and unencumbered shares of Common Stock of the Company. The Company shall not be requiredto issue any Common Shares or make any cash payment under the Plan until such obligations are satisfied.12.2SECTION 280G. To the extent that any of the payments and benefits provided for under the Plan or any other agreement orarrangement between the Company or its Affiliates and a Participant (collectively, the "Payments") (i) constitute a "parachutepayment" within the meaning of Code Section 280G and (ii) but for this paragraph would be subject to the excise tax imposedby Section 4999 of the Code, then the Payments shall be payable either (i) in full or (ii) as to such lesser amount which wouldresult in no portion of such Payments being subject to excise tax under Section 4999 of the Code (determined in accordancewith the reduction of payments and benefits paragraph set forth below); whichever of the foregoing amounts, taking intoaccount the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in theparticipant's receipt on an after-tax basis, of the greatest amount of benefits under this Plan, notwithstanding that all or someportion of such benefits may be taxable under Section 4999 of the Code. Any determination required under this provision willbe made by accountants chosen by the Company, whose determination shall be conclusive and binding upon the participantand the Company for all purposes.Except to the extent, if any, otherwise agreed in writing between a participant and the Company, reduction of payments andbenefits hereunder, if applicable, will be made by reducing, first, payments or benefits to be paid in cash in the order in whichsuch payment or benefit would be paid or provided (beginning with such payment or benefit that would be made last in timeand continuing, to the extent necessary, through to such payment or benefit that would be made first in time) and, then,reducing any benefit to be provided in-kind hereunder in a similar order; provided, however, that any reduction or eliminationof accelerated vesting of any equity award will first be accomplished by reducing or eliminating-13-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the vesting of such awards that are valued in full for purposes of Section 280G of the Code, then the reduction or elimination ofvesting of other equity awards.ARTICLE 13.FUTURE OF THE PLAN.13.1TERM OF THE PLAN. The Plan was initially effective on March 14, 1997. The Board may, at any time and for any reason,amend, suspend or terminate the Plan (subject to the approval of the Company's stockholders only to the extent required byapplicable law, regulations or rules). The Committee may issue ISOs under the Plan until the tenth anniversary of the date of itsmost recent amendment or restatement. The Committee may issue any Award other than ISOs at any time prior to the date, ifany, that the Board suspends or terminates the Plan. No Award may be granted pursuant to the Plan after such date, but Awardsgranted before such date may extend beyond that date.13.2PERFORMANCE AWARDS. Unless the Company determines to submit the Plan to the Company's stockholders at the firststockholder meeting that occurs in the fifth year following the year in which the Plan was last approved by stockholders (or anyearlier meeting designated by the Board), in accordance with the requirements of Code Section 162(m), and unless suchstockholder approval is obtained, then no further Awards made under Section 8.5 will qualify as performance-basedcompensation for purposes of Code Section 162(m).ARTICLE 14.DEFINITIONS.14.1Affiliate means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% ofsuch entity.14.2Award means any award of an Option or a Restricted Share under the Plan.14.3Board means the Company's Board of Directors, as constituted from time to time.14.4Change in Control shall mean:(a) The consummation of a merger or consolidation of the Company with or into another entity of any other corporatereorganization, if more than 50% of the combined voting power of the continuing or surviving entity's securities outstandingimmediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of theCompany immediately prior to such merger, consolidation, or other reorganization;(b) The sale, transfer or other disposition of all or substantially all of the Company's assets; or(c) A majority of the members of the Board are replaced during any eighteen month period by directors whose appointment orelection is not endorsed by a majority of the Board before the date of appointment or election.14.5Code means the Internal Revenue Code of 1986, as amended.14.6Committee means a committee of the Board, as described in Article 2.-14-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.14.7Common Share means, as may be applicable, one share of Traditional Common Stock, par value $0.01 per share, of theCompany to the extent any remains outstanding at the time of determination, or one share of Public Common Stock, par value$0.01 per share, of the Company, to the extent any remains outstanding at the time of determination.14.8Company means Heska Corporation, a Delaware corporation.14.9Consultant means a consultant or adviser who provides bona fide services to the Company, a Parent, a Subsidiary or an Affiliateas an independent contractor. Service as a Consultant shall be considered employment for all purposes of the Plan, except asprovided in Section 4.2.14.10Employee means a common-law employee of the Company, a Parent, a Subsidiary or an Affiliate.14.11Exchange Act means the Securities Exchange Act of 1934, as amended.14.12Exercise Price means the amount for which one Common Share may be purchased upon exercise of such Option, as specifiedin the applicable Stock Option Agreement.14.13Fair Market Value means, for so long as the Common Stock is listed on any established stock exchange or a national marketsystem, the value of the Common Stock as determined by reference to the most recent reported sale price of a share of CommonStock (or if no sales were reported, the most recent closing price) as quoted on such exchange or system at the time ofdetermination. In the absence of an established market for the Common Stock, the Fair Market Value shall be determined ingood faith by the Committee and such determination shall be conclusive and binding on all persons.14.14ISO means an incentive stock option described in section 422(b) of the Code.14.15NQO means a stock option not described in sections 422 or 423 of the Code.14.16Option means an ISO or NQO granted under the Plan and entitling the holder to purchase Common Shares.14.17Optionee means an individual or estate who holds an Option.14.18Outside Director shall mean a member of the Board who is not an Employee. Service as an Outside Director shall be consideredemployment for all purposes of the Plan, except as provided in Section 4.2.14.19Parent means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, ifeach of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of allclasses of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after theadoption of the Plan shall be considered a Parent commencing as of such date.14.20Participant means an individual or estate who holds an Award.-15-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.14.21Plan means this Heska Corporation 1997 Stock Incentive Plan, as amended from time to time.14.22Previously Issued Awards means Restricted Shares which were not subject to further vesting conditions, Common Shares issuedpursuant to the exercise of ISOs, Common Shares issued pursuant to the exercise of NQOs, Restricted Shares subject to furthervesting conditions, outstanding ISOs and outstanding NQOs.14.23Restricted Share means a Common Share awarded under the Plan.14.24Stock Award Agreement means the agreement between the Company and the recipient of a Restricted Share that contains theterms, conditions and restrictions pertaining to such Restricted Share.14.25Stock Option Agreement means the agreement between the Company and an Optionee that contains the terms, conditions andrestrictions pertaining to his or her Option.14.26Subsidiary means any corporation (other than the Company) in an unbroken chain of corporations beginning with theCompany, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or moreof the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation thatattains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as ofsuch date.14.27Subject Participant means a Participant who is designated by the Board as an "executive officer" under the Exchange Act.14.28Unexercised/Unvested Awards means Restricted Shares subject to further vesting conditions, as well as outstanding ISOs andoutstanding NQOs.ARTICLE 15.EXECUTION.To record the adoption of the Plan by the Board, the Company has caused its duly authorized officer to execute this documentin the name of the Company.-16-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. HESKA CORPORATION By:/s/ Jason A. Napolitano Chief Operating Officer, Chief Financial Officer, Executive Vice President and Secretary -17-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.2HESKA CORPORATION1997 STOCK INCENTIVE PLANRESTRICTED STOCK GRANT AGREEMENTTHIS AGREEMENT is made as of the _________ day of ____________, 20__ (the “Grant Date”) by and between HeskaCorporation (the “Company”) and (the “Executive”).In consideration of the mutual covenants and representations herein set forth, the Company and Executive agree as follows:SECTION 1. GRANT OF STOCK.1.1 Precedence of Plan. This Agreement is subject to and shall be construed in accordance with the terms and conditions ofthe Heska Corporation 1997 Stock Incentive Plan (the “Plan”), as now or hereinafter in effect. Any capitalized terms that are used inthis Agreement without being defined and that are defined in the Plan shall have the meaning specified in the Plan.1.2 Grant of Stock. The Company hereby grants to Executive an aggregate of _____ shares of Restricted Stock (the“Shares”), subject to vesting as provided in Section 2.SECTION 2. UNVESTED SHARES SUBJECT TO FORFEITURE. 2.1 Shares Subject to Forfeiture. The Shares are subject to time-based and performance-based vesting requirements.a. The Shares will vest in accordance with the Vesting Schedule attached as Attachment 1, with the performance-based vesting to be tied to one or more of the Company’s annual operating cash flow, annual operating income, annual revenue, stockprice level and stock price performance as compared to the S&P 500 Index over a specified time period. The shares will vest or beforfeited in a maximum of seven (7) years.b. In the event of a Change of Control prior to the vesting of all Shares, any remaining unvested Shares will vest. Forthis purpose, “Change of Control” means (i) a sale of all or substantially all of the Company’s assets, (ii) any merger, consolidation, orother business combination transaction of the Company with or into another corporation, entity, or person, other than a transaction inwhich the holders of at least a majority of the shares of voting capital stock of the Company outstanding immediately prior to suchtransaction continue to hold (either by such shares remaining outstanding or by their being converted into shares of voting capital stockof the surviving entity) a majority of the total voting power represented by the shares of voting capital stock of the Company (or thesurviving entity) outstanding immediately after such transaction, (iii) the direct or indirect acquisition (including by way of a tender orexchange offer) by any person, or persons acting as a group, of beneficial ownership or a right to acquire beneficial ownership ofshares representing a majority of the voting power of the then outstanding shares of capital stock of the Company, (iv) a contestedelection of Directors, as a result of which or in connection with which the persons who were Directors before such electionSource: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.or their nominees cease to constitute a majority of the Board, or (v) a dissolution or liquidation of the Company.c. In the event that Executive’s employment with the Company is terminated at least one (1) year following the GrantDate because of either (i) Executive’s death or (ii) Executive’s total and permanent disability , any remaining unvested Shares will vest.For this purpose, “total and permanent disability” means that Executive is unable to engage in any substantial gainful activity by reasonof any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can beexpected to last, for a continuous period of not less than one year.d. In the event that Executive’s employment with the Company is terminated prior to the vesting of all Shares for anyreason other than death or total and permanent disability, Executive will forfeit all right to any unvested Shares. In the event thatExecutive’s employment with the Company is terminated prior to one (1) year following the Grant Date because of either (i)Executive’s death or (ii) Executive’s total and permanent disability, Executive will forfeit all right to any unvested Shares.2.2 Restriction on Transfer. Until the Shares are vested, the Shares may not be sold, transferred, pledged, assigned, orotherwise alienated or hypothecated.SECTION 3. STOCKHOLDER RIGHTS3.1 Stock Register and Certificates. The Shares will be recorded in the stock register of the Company in the name ofExecutive. If applicable, a stock certificate or certificates representing the Shares will be registered in the name of Executive, but suchcertificates shall remain in the custody of the Company. Executive shall deposit with the Company a Stock Assignment Separate fromCertificate in the form attached below as Attachment 2, endorsed in blank, so as to permit retransfer to the Company of all or a portionof the Shares that are forfeited or otherwise do not become vested in accordance with the Plan and this Agreement.3.2 Exercise of Stockholder Rights. Executive shall have the right to vote the Shares (to the extent of the voting rights of saidShares, if any), to receive and retain all regular cash dividends and such other distributions, as the Board of Directors of the Companymay, in its discretion, designate, pay or distribute on such Shares, and to exercise all other rights, powers and privileges of a holder ofCommon Stock with respect to such Shares, except as set forth in this Agreement and the Plan.3.3 Legends. Certificates, if any, representing the Shares will contain the following or other legends in the Company’sdiscretion:THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONSUPON AND OBLIGATIONS WITH RESPECT TO TRANSFER AND RIGHTS OF REPURCHASE AS SETFORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL REGISTERED HOLDER,A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.-2-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.SECTION 4. RESPONSIBILITY FOR TAXES.4.1 Section 83(b) Election. Executive may complete and file with the Internal Revenue Service an election pursuant toSection 83(b) of the Internal Revenue Code to be taxed currently on the fair market value of the Shares without regard to the vestingrestrictions set forth in this Agreement. Executive shall be responsible for all taxes associated with the acceptance of the transfer of theShares, including any tax liability associated with the representation of fair market value if the election is made pursuant to CodeSection 83(b).4.2 Withholding. In accordance with Section 12 of the Plan, Executive agrees to make arrangements satisfactory to theCompany for the satisfaction of any withholding tax obligations that arise in connection with the Plan under applicable federal, state,local or foreign law. The Company in its discretion may permit Executive to satisfy all or part of Executive’s withholding or incometax obligations by having the Company withhold all or a portion of the Shares that otherwise would be issued to Executive on vesting.SECTION 5. MISCELLANEOUS.5.1 Not an Employment Contract. This Agreement is not an employment contract and nothing in this Agreement shall bedeemed to create in any way whatsoever any obligation on the part of Executive to remain in the service of the Company in anycapacity, or of the Company to continue Executive’s service in any capacity.5.2 Effect on Employee Benefits. Executive agrees that the Award will constitute special incentive compensation that will notbe taken into account as “salary” or “compensation” or “bonus” in determining the amount of any payment under any pension,retirement, profit sharing or other remuneration plan of the Company unless so provided in such plan.5.3 Further Assurances. The parties agree to execute such further instruments and to take such further action as mayreasonably be necessary to carry out the intent of this Agreement.5.4 Entire Agreement. This Agreement, including any exhibits, is the entire agreement of the parties with respect to thesubject matter hereof and supersedes all prior oral and written understandings of the parties.5.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State ofColorado as applied to contracts between Colorado residents to be wholly performed within the State of Colorado.-3-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.EXECUTIVE HESKA CORPORATION a Delaware corporation By: Title: Address -4-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Attachment 1VESTING SCHEDULESource: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Attachment 2Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ASSIGNMENT SEPARATE FROM CERTIFICATEFOR VALUE RECEIVED, I, _____________________, hereby sell, assign and transfer unto ( ) shares of the Common Stock of Heska Corporation, standing in my name on the books of said corporation represented byCertificate No. herewith and do hereby irrevocably constitute and appoint to transfer said stock on the books of thewithin-named corporation with full power of substitution in the premises.Dated: , 20 . Signature: This Assignment Separate from Certificate was executed in conjunction with the terms of a Restricted Stock Grant Agreementbetween the above assignor and Heska Corporation, dated __________ __, 20__.Instruction:Please do not fill in any blanks other than the signature line.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.3HESKA CORPORATION1997 STOCK INCENTIVE PLANRESTRICTED STOCK GRANT AGREEMENT(Management Incentive Plan Award)THIS AGREEMENT is made as of the _________ day of ____________, 20__ (the “Grant Date”) by and between HeskaCorporation (the “Company”) and ___________________________ (the “Executive”), in connection with the Executive’s election toreceive a portion of Executive’s ____ award under the Management Incentive Plan in the form of Restricted Stock.In consideration of the mutual covenants and representations herein set forth, the Company and Executive agree as follows:SECTION 1. GRANT OF STOCK.1.1 Precedence of Plan. This Agreement is subject to and shall be construed in accordance with the terms and conditions ofthe Heska Corporation 1997 Stock Incentive Plan (the “Plan”), as now or hereinafter in effect. Any capitalized terms that are used inthis Agreement without being defined and that are defined in the Plan shall have the meaning specified in the Plan.1.2 Grant of Stock. The Company hereby grants to Executive an aggregate of ___________ shares of Restricted Stock (the“Shares”), subject to vesting as provided in Section 2.SECTION 2. UNVESTED SHARES SUBJECT TO FORFEITURE. 2.1 Shares Subject to Forfeiture.a. The Shares are subject to vesting requirements as established in connection with the Management Incentive Plan,including the terms and conditions for awards made under the ________ Management Incentive Plan (the “MIP”). As described inmore detail in the MIP, up to 100% of the Shares will vest at the later of the time payments are made under the MIP (the “PayoutTime”) or one (1) year from the Grant Date, and will vest as determined by dividing ___% of the Executive’s MIP Payout (as definedin the MIP) by $_____, and rounding to the nearest whole share. Executive will forfeit all Shares that do not vest at that time.b. In the event that the Executive is an active employee through December 31, ____ and at least one (1) year from theGrant Date and Executive’s employment with the Company is subsequently terminated because of either (i) Executive’s death or (ii)Executive being unable to engage in any substantial gainful activity by reason of any medically determinable physical or mentalimpairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of not lessthan one (1) year, up to 100% of the Shares will vest at the Payout Time as determined by dividing ___% of the Executive’s MIPPayout (as defined in the MIP) by $_____, and rounding to the nearest whole share. Executive will forfeit all Shares that do not vest atthat time.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.c. Except in the cases of (i) either a Change in Control of the Company, the effect of which is governed by the MIP,or (ii) the circumstances described in subsection b. above, which is governed by subsection b. above, in the event that Executive’semployment with the Company is terminated prior to vesting, Executive will forfeit all right to the Shares. For the avoidance of doubt,in the event Executive’s employment is terminated due to Executive’s death on or before December 31, ____, Executive will forfeit allright to the Shares but this forfeiture is not intended to diminish any MIP Payout to which Executive’s designated beneficiary isentitled, as governed by the MIP.2.2 Restriction on Transfer. Until the Shares are vested, the Shares may not be sold, transferred, pledged, assigned, orotherwise alienated or hypothecated.SECTION 3. STOCKHOLDER RIGHTS3.1 Stock Register and Certificates. The Shares will be recorded in the stock register of the Company in the name ofExecutive. If applicable, a stock certificate or certificates representing the Shares will be registered in the name of Executive, but suchcertificates shall remain in the custody of the Company. Executive shall deposit with the Company a Stock Assignment Separate fromCertificate in the form attached below as Attachment 1, endorsed in blank, so as to permit retransfer to the Company of all or a portionof the Shares that are forfeited or otherwise do not become vested in accordance with the Plan and this Agreement.3.2 Exercise of Stockholder Rights. Executive shall have the right to vote the Shares (to the extent of the voting rights of saidShares, if any), to receive and retain all regular cash dividends and such other distributions, as the Board of Directors of the Companymay, in its discretion, designate, pay or distribute on such Shares, and to exercise all other rights, powers and privileges of a holder ofCommon Stock with respect to such Shares, except as set forth in this Agreement and the Plan.3.3 Legends. Certificates, if any, representing the Shares will contain the following or other legends in the Company’sdiscretion:THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONSUPON AND OBLIGATIONS WITH RESPECT TO TRANSFER AND RIGHTS OF REPURCHASE AS SETFORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL REGISTERED HOLDER,A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.SECTION 4. RESPONSIBILITY FOR TAXES.4.1 Section 83(b) Election. Executive may complete and file with the Internal Revenue Service an election pursuant toSection 83(b) of the Internal Revenue Code to be taxed currently on the fair market value of the Shares without regard to the vestingrestrictions set forth in this Agreement. Executive shall be responsible for all taxes associated with the acceptance of the transfer of theShares, including any tax liability associated with the representation of fair market value if the election is made pursuant to CodeSection 83(b).-2-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.4.2 Withholding. In accordance with Section 12 of the Plan, Executive agrees to make arrangements satisfactory to theCompany for the satisfaction of any withholding tax obligations that arise in connection with the Plan under applicable federal, state,local or foreign law. The Company in its discretion may permit Executive to satisfy all or part of his withholding or income taxobligations by having the Company withhold all or a portion of the Shares that otherwise would be issued to him on vesting.SECTION 5. MISCELLANEOUS.5.1 Not an Employment Contract. This Agreement is not an employment contract and nothing in this Agreement shall bedeemed to create in any way whatsoever any obligation on the part of Executive to remain in the service of the Company in anycapacity, or of the Company to continue Executive’s service in any capacity.5.2 Effect on Employee Benefits. Executive agrees that the Award will constitute special incentive compensation that will notbe taken into account as “salary” or “compensation” or “bonus” in determining the amount of any payment under any pension,retirement, profit sharing or other remuneration plan of the Company unless so provided in such plan.5.3 Further Assurances. The parties agree to execute such further instruments and to take such further action as mayreasonably be necessary to carry out the intent of this Agreement.5.4 Entire Agreement. This Agreement, including any exhibits, is the entire agreement of the parties with respect to thesubject matter hereof and supersedes all prior oral and written understandings of the parties.5.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State ofColorado as applied to contracts between Colorado residents to be wholly performed within the State of Colorado.IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.EXECUTIVE HESKA CORPORATION a Delaware corporation By: Title: Address -3-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Attachment 1Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ASSIGNMENT SEPARATE FROM CERTIFICATEFOR VALUE RECEIVED, I, _____________________, hereby sell, assign and transfer unto_______________________________________(____________) shares of the Common Stock of Heska Corporation, standing in myname on the books of said corporation represented by Certificate No. _______ herewith and do hereby irrevocably constitute andappoint ____________________________________________to transfer said stock on the books of the within-named corporation with full power of substitution in the premises.Dated: , 20 . Signature: This Assignment Separate from Certificate was executed in conjunction with the terms of a Restricted Stock Grant Agreementbetween the above assignor and Heska Corporation, dated __________ __, 20__.Instruction:Please do not fill in any blanks other than the signature line.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.4HESKA CORPORATION1997 STOCK INCENTIVE PLANRESTRICTED STOCK GRANT AGREEMENT(Outside Director Award)THIS AGREEMENT is made as of the _________ day of ____________, 20__ (the “Grant Date”) by and between HeskaCorporation (the “Company”) and (the “Director”).In consideration of the mutual covenants and representations herein set forth, the Company and Director agree as follows:SECTION 1 GRANT OF STOCK.1.1 Precedence of Plan. This Agreement is subject to and shall be construed in accordance with the terms and conditions ofthe Heska Corporation 1997 Stock Incentive Plan (the “Plan”), as now or hereinafter in effect. Any capitalized terms that are used inthis Agreement without being defined and that are defined in the Plan shall have the meaning specified in the Plan.1.2 Grant of Stock. The Company hereby grants to Director an aggregate of ___ shares of Restricted Stock (the “Shares”),subject to vesting as provided in Section 2.SECTION 2. UNVESTED SHARES SUBJECT TO FORFEITURE.2.1 Shares Subject to Forfeiture.A. The Shares will vest (the “Vesting Time”) at the latter of (i) the Company’s next Annual Meeting of Stockholders(the “Meeting”) and (ii) the one year anniversary of the Grant Date. In addition, vesting is subject to (i) the Director’s service as amember of the Company’s Board of Directors (the “Board”) through the Vesting Time, unless that Director’s current Board termexpires at the Meeting, in which case vesting is subject to the Director’s service as a member of the Company’s Board to the Meeting,and (ii) the Director not engaging in “Competition” prior to the Vesting Time. For purposes of this Agreement, Director will bedeemed to have engaged in “Competition” if Director, without the written consent of the Board, directly or indirectly (i) providesservices or assistance in any form to any individual, entity, or company providing veterinary products for the companion animal healthindustry or imaging products or services for the veterinary market (a “Restricted Company”), whether such services or assistance isprovided as an employee, consultant, agent, corporate officer, director, or otherwise or (ii) participates in the financing, operation,management, or control of, a Restricted Company. A Restricted Company includes, without limitation, Abaxis, Inc., IDEXXLaboratories, Inc., scil animal health company GmbH (currently a wholly-owned subsidiary of Henry Schein, Inc.), SoundTechnologies, Inc. (currently a wholly-owned subsidiary of VCA Inc.), and Synbiotics Corporation (currently a wholly ownedsubsidiary of Zoetis Inc.). Notwithstanding the foregoing, Director shall not be deemed to be in Competition if Director is employed orengaged in a corporate function or senior management position (and holdingSource: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.commensurate equity interests) in a division of a Restricted Company, so long as such division is not in any way engaged in providingveterinary products for the companion animal health industry or imaging products or services for the veterinary market and Directordoes not directly or indirectly provide services or assistance to any division that does provide veterinary products for the companionanimal health industry or imaging products or services for the veterinary market.b. In the event that the Director serves as a member of the Company’s Board for at least one (1) year from the GrantDate and Director’s service as a member of the Board is subsequently terminated because of either (i) Director’s death or (ii) Directorbeing unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairmentwhich can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of not less than one (1)year, the Shares will vest at the time the Director’s service as a member of the Board terminates. Furthermore, if Director completes hisor her Board term at the Meeting and prior to the Vesting Time and does not engage in Competition prior to the Vesting Time, theShares shall vest at the Vesting Time.c. Except in the cases of (i) either a Change in Control of the Company, in which case the Shares shall vest, or (ii) thecircumstances described in subsection b. above, which is governed by subsection b. above, in the event that Director’s service as amember of the Company’s Board is terminated prior to vesting, Director will forfeit all right to the Shares.2.2 Restriction on Transfer. Until the Shares are vested, the Shares may not be sold, transferred, pledged, assigned, orotherwise alienated or hypothecated.SECTION 3. STOCKHOLDER RIGHTS3.1 Stock Register and Certificates. The Shares will be recorded in the stock register of the Company in the name of Director.If applicable, a stock certificate or certificates representing the Shares will be registered in the name of Director, but such certificatesshall remain in the custody of the Company. Director shall deposit with the Company a Stock Assignment Separate from Certificate inthe form attached below as Attachment 1, endorsed in blank, so as to permit retransfer to the Company of all or a portion of the Sharesthat are forfeited or otherwise do not become vested in accordance with the Plan and this Agreement.3.2 Exercise of Stockholder Rights. Director shall have the right to vote the Shares (to the extent of the voting rights of saidShares, if any), to receive and retain all regular cash dividends and such other distributions, as the Board of the Company may, in itsdiscretion, designate, pay or distribute on such Shares, and to exercise all other rights, powers and privileges of a holder of CommonStock with respect to such Shares, except as set forth in this Agreement and the Plan.3.3 Legends. Certificates, if any, representing the Shares will contain the following or other legends in the Company’sdiscretion:THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONSUPON AND OBLIGATIONS WITH RESPECT TO TRANSFER AND RIGHTS OF REPURCHASE AS SETFORTH IN AN-2-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL REGISTERED HOLDER, A COPY OFWHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.SECTION 4. RESPONSIBILITY FOR TAXES.4.1 Section 83(b) Election. Director may complete and file with the Internal Revenue Service an election pursuant to Section83(b) of the Internal Revenue Code to be taxed currently on the fair market value of the Shares without regard to the vestingrestrictions set forth in this Agreement. Director shall be responsible for all taxes associated with the acceptance of the transfer of theShares, including any tax liability associated with the representation of fair market value if the election is made pursuant to CodeSection 83(b).4.2 Withholding. In accordance with Section 12 of the Plan, Director agrees to make arrangements satisfactory to theCompany for the satisfaction of any withholding tax obligations that arise in connection with the Plan under applicable federal, state,local or foreign law.SECTION 5. MISCELLANEOUS.5.1 Not an Employment Contract. This Agreement is not an employment contract and nothing in this Agreement shall bedeemed to create in any way whatsoever any obligation on the part of Director to remain in the service of the Company in anycapacity, or of the Company to continue Director’s service in any capacity.5.2 Further Assurances. The parties agree to execute such further instruments and to take such further action as mayreasonably be necessary to carry out the intent of this Agreement.5.3 Entire Agreement. This Agreement, including any exhibits, is the entire agreement of the parties with respect to thesubject matter hereof and supersedes all prior oral and written understandings of the parties.5.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State ofColorado as applied to contracts between Colorado residents to be wholly performed within the State of Colorado.IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.DIRECTOR HESKA CORPORATION a Delaware corporation By: Title: Address -3-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Attachment 1Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ASSIGNMENT SEPARATE FROM CERTIFICATEFOR VALUE RECEIVED, I, _____________________, hereby sell, assign and transfer unto ( ) shares of theCommon Stock of Heska Corporation, standing in my name on the books of said corporation represented by Certificate No. herewithand do hereby irrevocably constitute and appoint to transfer said stock on the books of the within-named corporationwith full power of substitution in the premises.Dated: , 20 . Signature: This Assignment Separate from Certificate was executed in conjunction with the terms of a Restricted Stock Grant Agreementbetween the above assignor and Heska Corporation, dated __________ __, 20__.Instruction:Please do not fill in any blanks other than the signature line.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.5Heska Corporation 1997 Stock Incentive PlanStock Option Agreement(employees and consultants)Tax TreatmentThis option is intended to be an incentive stock option under section 422 of the Internal Revenue Codeor a nonstatutory option, as provided in the Notice of Stock Option Grant.Vesting/ExercisabilityThis option vests and becomes exercisable in installments, as shown in the Notice of Stock OptionGrant. In addition, this option shall vest and become exercisable in full if one of the following eventsoccurs:● Your service as an Employee, Consultant or Outside Director of the Company or a Subsidiaryterminates because of death or total and permanent disability, or● The Company is a party to a merger or other reorganization while you are an Employee,Consultant or Outside Director of the Company or a Subsidiary, this option is not continued bythe Company and is not assumed by the surviving corporation or its parent, and the survivingcorporation or its parent does not substitute its own option for this option, or● The Company is subject to a “Change in Control” while you are an Employee, Consultant orOutside Director of the Company or a Subsidiary and, your service is terminated either (i)without Cause as part of an agreement which contemplated such Change in Control or (ii)without your consent and without Cause, as defined below. If the surviving entity demotes you toa lower position, materially reduces your authority or responsibilities, materially reduces yourtotal compensation or announces its intention to relocate your principal place of work by morethan 20 miles, then that action will be treated as a termination of your service.● “Cause” shall mean (i) your failure to perform your assigned duties or responsibilities as anEmployee, Consultant or Outside Director of the Company or a Subsidiary (other than a failureresulting from total and permanent disability, as discussed below) after notice thereof from theCompany describing your failure to perform such duties or responsibilities; (ii) your materialbreach of any confidentiality agreement or invention assignment agreement between you and theCompany or a Subsidiary; (iii) your engaging in any act of dishonesty, fraud, misrepresentation,moral turpitude or misappropriation of material property that was or is materially injurious to theCompany or its affiliates; (iv) your violation of any federal or state law or regulation applicable tothe Company’s business; or (v) your being convicted of, or entering a plea of nolo contendere to,any crime.No additional shares become vested after your service as an Employee, Consultant or Outside Directorof the Company or a Subsidiary has terminated for any reason other than those outlined herein.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.TermThis option expires in any event at the close of business at Company headquarters on the day beforethe 10th anniversary of the Date of Grant, as shown in the Notice of Stock Option Grant. (It will expireearlier if your service terminates, as described below.)Regular TerminationIf your service as an Employee, Consultant or Outside Director of the Company or a Subsidiaryterminates for any reason except death or total and permanent disability, then this option will expire atthe close of business at Company headquarters on the date three months after your termination date.The Company determines when your service terminates for this purpose.DeathIf your service as an Employee, Consultant or Outside Director of the Company or a Subsidiaryterminates because of your death, then this option will expire at the close of business at Companyheadquarters on the date 12 months after the date of death.DisabilityIf your service as an Employee, Consultant or Outside Director of the Company or a Subsidiaryterminates because of your total and permanent disability, then this option will expire at the close ofbusiness at Company headquarters on the date 12 months after your termination date.For all purposes under this Agreement, “total and permanent disability” means that you are unable toengage in any substantial gainful activity by reason of any medically determinable physical or mentalimpairment which can be expected to result in death or which has lasted, or can be expected to last, fora continuous period of not less than one year.Leaves of AbsenceVesting of this option shall be suspended during any unpaid leave of absence unless continued vestingis required by the terms of the leave or by applicable law.For purposes of this option, your service does not terminate when you go on a military leave, a sickleave or another bona fide leave of absence, if the Company approved your leave in writing and ifcontinued crediting of service is required by the terms of the leave or by applicable law.For purposes of incentive stock options, no such leave may exceed 90 days, unless reemployment uponexpiration of such leave is guaranteed by the terms of the leave or by applicable law. If reemploymentupon expiration of a leave of absence approved by the Company is not so guaranteed, then threemonths following the 91st day of such leave, an incentive stock option shall cease to be treated as anincentive stock option and shall be treated for tax purposes as a nonstatutory option.Unless you immediately return to active work when the approved leave ends, your service willterminate.Restrictions on ExerciseThe Company will not permit you to exercise this option if the issuance of shares at that time wouldviolate any law or regulation.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Notice of ExerciseWhen you wish to exercise this option, you must notify the Company by filing the proper “Notice ofExercise” form at the address given on the form. Your notice must specify how many shares you wishto purchase. The exercise will be effective when the Company receives the Notice of Exercise with theoption exercise payment described herein.If someone else wants to exercise this option after your death, that person must prove to the Company'ssatisfaction that he or she is entitled to do so.Form of PaymentWhen you submit your notice of exercise, you must include payment of the option exercise price forthe shares you are purchasing. Payment may be made in one (or a combination of two or more) of thefollowing forms:● Your personal check, a cashier's check or a money order.● Certificates for shares of Company stock that you own, along with any forms needed to affect atransfer of those shares to the Company. The value of the shares, determined as of the effective dateof the option exercise, will be applied to the option exercise price. However, you may not surrendershares of Company stock in payment of the exercise price if your action would cause the Companyto recognize compensation expense (or additional compensation expense) with respect to thisoption for financial reporting purposes.● Irrevocable directions to a securities broker approved by the Company to sell all or part of youroption shares and to deliver to the Company proceeds from the sale in an amount sufficient to paythe option exercise price and any withholding taxes. (The balance of the sale proceeds, if any, willbe delivered to you.) The directions must be given by signing a special “Notice of Exercise” formprovided by the Company.Withholding Taxes andStock WithholdingYou will not be allowed to exercise this option unless you make arrangements acceptable to theCompany to pay any withholding taxes that may be due as a result of the option exercise. Thesearrangements may include (with the Company’s approval) withholding shares of Company stock thatotherwise would be issued to you when you exercise this option. The value of these shares, determinedas of the effective date of the option exercise, will be applied to the withholding taxes.Restrictions on ResaleBy signing this Agreement, you agree not to sell any option shares at a time when applicable laws,Company policies or an agreement between the Company and its underwriters prohibit a sale. Thisrestriction will apply as long as you are an Employee, Consultant or Outside Director of the Companyor a Subsidiary.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Transfer of OptionPrior to your death, only you may exercise this option. You cannot transfer or assign this option. Forinstance, you may not sell this option or use it as security for a loan. You may, however, dispose of thisoption in your will, by the laws of descent and distribution or through a beneficiary designation.Regardless of any marital property settlement agreement, the Company is not obligated to honor anotice of exercise from your former spouse, nor is the Company obligated to recognize your formerspouse's interest in your option in any other way.Retention RightsNeither your option nor this Agreement gives you the right to be employed or otherwise retained by theCompany or a Subsidiary in any capacity. The Company or a Subsidiary reserves the right to terminateyour service at any time, with or without cause.Stockholder RightsYou, or your estate or heirs, have no rights as a stockholder of the Company until you have exercisedthis option by giving the required notice to the Company and paying the exercise price.Applicable LawThis Agreement will be interpreted and enforced under the laws of the State of Colorado (withoutgiving effect to its conflict of laws provisions).The Plan and OtherAgreementsThe 1997 Stock Incentive Plan is incorporated in this Agreement by reference. Unless otherwisedefined herein, all capitalized terms herein have the same defined meanings as in the 1997 StockIncentive Plan.This Agreement and the Plan constitute the entire understanding between you and the Companyregarding this option. Any prior agreements, commitments or negotiations concerning this option aresuperseded. This Agreement may be amended only by another written agreement, signed by bothparties.By signing the notice of stock option grant of this Agreement, you agree to all of the terms and conditions described above andin the 1997 Stock Incentive Plan.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.6Heska Corporation 1997 Stock Incentive PlanStock Option Agreement(Outside Directors)Tax TreatmentThis option is intended to be a nonstatutory option.Vesting/ExercisabilityThis option is immediately exercisable, but subject to vesting as indicated in the Notice of Stock OptionGrant. In the event of termination of your service as an Employee, Consultant or Outside Director of theCompany or a Subsidiary, any unvested shares issued upon exercise are subject to repurchase by theCompany at the same price as the original Exercise Price Per Share. The Company's right to repurchasesuch shares shall lapse as the shares become vested as indicated in the Notice of Stock Option Grant.In addition, this option becomes vested in full if one of the following events occurs:● Your service as an Employee, Consultant or Outside Director of the Company or a Subsidiaryterminates because of death, total and permanent disability, or retirement at or after age 65, or● The Company is a party to a merger or other reorganization while you are an Employee,Consultant or Outside Director of the Company or a Subsidiary, this option is not continued by theCompany and is not assumed by the surviving corporation or its parent, and the survivingcorporation or its parent does not substitute its own option for this option, or● The Company is subject to a “Change in Control” while you are an Employee, Consultant orOutside Director of the Company or a Subsidiary and, your service is terminated either (i) withoutCause as part of an agreement which contemplated such Change in Control or (ii) without yourconsent and without Cause, as defined below. If the surviving entity demotes you to a lowerposition, materially reduces your authority or responsibilities, materially reduces your totalcompensation or announces its intention to relocate your principal place of work by more than 20miles, then that action will be treated as a termination of your service.“Cause” shall mean (i) your failure to perform your assigned duties or responsibilities as an Employee,Consultant or Outside Director of the Company or a Subsidiary (other than a failure resulting from totaland permanent disability, as discussed below) after notice thereof from the Company describing yourfailure to perform such duties or responsibilities; (ii) your material breach of any confidentialityagreement or invention assignment agreement between you and the Company or a Subsidiary; (iii) yourengaging in any act of dishonesty, fraud, misrepresentation, moral turpitude or misappropriation ofmaterial1Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. property that was or is materially injurious to the Company or its affiliates; (iv) your violation of anyfederal or state law or regulation applicable to the Company’s business; or (v) your being convicted of,or entering a plea of nolo contendere to, any crime.No additional shares become vested after yourservice as an Employee, Consultant or Outside Director of the Company or a Subsidiary has terminatedfor any reason other than those outlined herein.TermThis option expires in any event at the close of business at Company headquarters on the day before the10th anniversary of the Date of Grant, as shown in the Notice of Stock Option Grant. (It will expireearlier if your service terminates, as described below.)Regular TerminationIf your service as an Employee, Consultant or Outside Director of the Company or a Subsidiaryterminates for any reason except death or total and permanent disability, then this option will expire atthe close of business at Company headquarters on the date three months after your termination date.The Company determines when your service terminates for this purpose.DeathIf your service as an Employee, Consultant or Outside Director of the Company or a Subsidiaryterminates because of your death, then this option will expire at the close of business at Companyheadquarters on the date 12 months after the date of death.DisabilityIf your service as an Employee, Consultant or Outside Director of the Company or a Subsidiaryterminates because of your total and permanent disability, then this option will expire at the close ofbusiness at Company headquarters on the date 12 months after your termination date.For all purposes under this Agreement, “total and permanent disability” means that you are unable toengage in any substantial gainful activity by reason of any medically determinable physical or mentalimpairment which can be expected to result in death or which has lasted, or can be expected to last, fora continuous period of not less than one year.2Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Restrictions on ExerciseThe Company will not permit you to exercise this option if the issuance of shares at that time wouldviolate any law or regulation.Notice of ExerciseWhen you wish to exercise this option, you must notify the Company by filing the proper “Notice ofExercise” form at the address given on the form. Your notice must specify how many shares you wishto purchase. The exercise will be effective when the Company receives the Notice of Exercise with theoption exercise payment described herein.If someone else wants to exercise this option after your death, that person must prove to the Company'ssatisfaction that he or she is entitled to do so.Exercise of Unvested SharesExercise of unvested shares is allowed under the Plan. If you would like to exercise your option beforeit is vested, you must complete a Stock Repurchase Agreement, which provides for the repurchase ofthat portion of the shares that remain unvested at the time of your termination.Form of PaymentWhen you submit your notice of exercise, you must include payment of the option exercise price forthe shares you are purchasing. Payment may be made in one (or a combination of two or more) of thefollowing forms:● Your personal check, a cashier's check or a money order.● Certificates for shares of Company stock that you own, along with any forms needed to affect atransfer of those shares to the Company. The value of the shares, determined as of the effective dateof the option exercise, will be applied to the option exercise price. However, you may not surrendershares of Company stock in payment of the exercise price if your action would cause the Companyto recognize compensation expense (or additional compensation expense) with respect to thisoption for financial reporting purposes.● Irrevocable directions to a securities broker approved by the Company to sell all or part of youroption shares and to deliver to the Company proceeds from the sale in an amount sufficient to paythe option exercise price and any withholding taxes. (The balance of the sale proceeds, if any, willbe delivered to you.) The directions must be given by signing a special “Notice of Exercise” formprovided by the Company.3Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Withholding Taxes and StockWithholdingYou will not be allowed to exercise this option unless you make arrangements acceptable to theCompany to pay any withholding taxes that may be due as a result of the option exercise. Thesearrangements may include (with the Company’s approval) withholding shares of Company stock thatotherwise would be issued to you when you exercise this option. The value of these shares, determinedas of the effective date of the option exercise, will be applied to the withholding taxes.Repurchase RightsIn the event that you exercise unvested shares through the execution of a Stock Repurchase Agreement,the Company will have 90 days to repurchase any shares that remain unvested at the time of yourtermination. The terms of any such repurchase will be set forth in the Stock Repurchase Agreement.Restrictions on ResaleBy signing this Agreement, you agree not to sell any option shares at a time when applicable laws,Company policies or an agreement between the Company and its underwriters prohibit a sale. Thisrestriction will apply as long as you are an Employee, Consultant or Outside Director of the Companyor a Subsidiary.Transfer of OptionPrior to your death, only you may exercise this option. You cannot transfer or assign this option. Forinstance, you may not sell this option or use it as security for a loan. You may, however, dispose of thisoption in your will, by the laws of descent and distribution or through a beneficiary designation.Regardless of any marital property settlement agreement, the Company is not obligated to honor anotice of exercise from your former spouse, nor is the Company obligated to recognize your formerspouse's interest in your option in any other way.Retention RightsNeither your option nor this Agreement give you the right to be employed or otherwise retained by theCompany or a Subsidiary in any capacity.Stockholder RightsYou, or your estate or heirs, have no rights as a stockholder of the Company until you have exercisedthis option by giving the required notice to the Company and paying the exercise price.4Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Applicable LawThis Agreement will be interpreted and enforced under the laws of the State of Colorado (withoutgiving effect to its conflict of laws provisions).The Plan and OtherAgreementsThe 1997 Stock Incentive Plan is incorporated in this Agreement by reference. Unless otherwisedefined herein, all capitalized terms herein have the same defined meanings as in the 1997 StockIncentive Plan.This Agreement and the Plan constitute the entire understanding between you and the Companyregarding this option. Any prior agreements, commitments or negotiations concerning this option aresuperseded. This Agreement may be amended only by another written agreement, signed by bothparties.By signing the Notice of Stock option Grant of this Agreement, you agree to all of the terms and conditions described aboveand in the 1997 Stock Incentive Plan.5Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.8HESKA CORPORATION2003 EQUITY INCENTIVE PLANRESTRICTED STOCK GRANT AGREEMENTTHIS AGREEMENT is made as of the _________ day of ____________, 20__ (the “Grant Date”) by and between HeskaCorporation (the “Company”) and ___________ (the “Executive”).In consideration of the mutual covenants and representations herein set forth, the Company and Executive agree as follows:SECTION 1. GRANT OF STOCK1.1 Precedence of Plan. This Agreement is subject to and shall be construed in accordance with the terms and conditions ofthe Heska Corporation 2003 Equity Incentive Plan (the “Plan”), as now or hereinafter in effect. Any capitalized terms that are used inthis Agreement without being defined and that are defined in the Plan shall have the meaning specified in the Plan.1.2 Grant of Stock. The Company hereby grants to Executive an aggregate of ___________ shares of Restricted Stock (the“Shares”), subject to vesting as provided in Section 2.SECTION 2. UNVESTED SHARES SUBJECT TO FORFEITURE.2.1 Shares Subject to Forfeiture. The Shares are subject to time-based and performance-based vesting requirements.a. The Shares will vest in accordance with the Vesting Schedule attached as Attachment 1, with the performance-based vesting to be tied to one or more of the Company’s annual operating cash flow, annual operating income, annual revenue, stockprice level and stock price performance as compared to the S&P 500 Index over a specified time period. The shares will vest or beforfeited in a maximum of seven (7) years.b. In the event of a Change of Control prior to the vesting of all Shares, any remaining unvested Shares will vest. Forthis purpose, “Change of Control” means (i) a sale of all or substantially all of the Company's assets, (ii) any merger, consolidation, orother business combination transaction of the Company with or into another corporation, entity, or person, other than a transaction inwhich the holders of at least a majority of the shares of voting capital stock of the Company outstanding immediately prior to suchtransaction continue to hold (either by such shares remaining outstanding or by their being converted into shares of voting capital stockof the surviving entity) a majority of the total voting power represented by the shares of voting capital stock of the Company (or thesurviving entity) outstanding immediately after such transaction, (iii) the direct or indirect acquisition (including by way of a tender orexchange offer) by any person, or persons acting as a group, of beneficial ownership or a right to acquire beneficial ownership ofshares representing a majority of the voting power of the then outstanding shares of capital stock of the Company, (iv) a contestedelection of Directors, as a result of which or in connection with which the persons who were Directors before such electionSource: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.or their nominees cease to constitute a majority of the Board, or (v) a dissolution or liquidation of the Company.c. In the event that Executive's employment with the Company is terminated at least one (1) year following the GrantDate because of either (i) Executive's death or (ii) Executive’s Disability, any remaining unvested Shares will vest.d. In the event that Executive's employment with the Company is terminated prior to the vesting of all Shares for anyreason other than death or Disability, Executive will forfeit all right to any unvested Shares. In the event that Executive’s employmentwith the Company is terminated prior to one (1) year following the Grant Date because of either (i) Executive’s death or (ii)Executive’s Disability, Executive will forfeit all right to any unvested Shares.2.2 Restriction on Transfer. Until the Shares are vested, the Shares may not be sold, transferred, pledged, assigned, orotherwise alienated or hypothecated.SECTION 3. STOCKHOLDER RIGHTS3.1 Stock Register and Certificates. The Shares will be recorded in the stock register of the Company in the name ofExecutive. If applicable, a stock certificate or certificates representing the Shares will be registered in the name of Executive, but suchcertificates shall remain in the custody of the Company. Executive shall deposit with the Company a Stock Assignment Separate fromCertificate in the form attached below as Attachment 2, endorsed in blank, so as to permit retransfer to the Company of all or a portionof the Shares that are forfeited or otherwise do not become vested in accordance with the Plan and this Agreement.3.2 Exercise of Stockholder Rights. Executive shall have the right to vote the Shares (to the extent of the voting rights of saidShares, if any), to receive and retain all regular cash dividends and such other distributions, as the Board of Directors of the Companymay, in its discretion, designate, pay or distribute on such Shares, and to exercise all other rights, powers and privileges of a holder ofCommon Stock with respect to such Shares, except as set forth in this Agreement and the Plan.3.3 Legends. Certificates, if any, representing the Shares will contain the following or other legends in the Company’sdiscretion:THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONSUPON AND OBLIGATIONS WITH RESPECT TO TRANSFER AND RIGHTS OF REPURCHASE AS SETFORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL REGISTERED HOLDER,A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.SECTION 4. RESPONSIBILITY FOR TAXES.4.1 Section 83(b) Election. Executive may complete and file with the Internal Revenue Service an election pursuant toSection 83(b) of the Internal Revenue Code to be taxed-2-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.currently on the fair market value of the Shares without regard to the vesting restrictions set forth in this Agreement. Executive shall beresponsible for all taxes associated with the acceptance of the transfer of the Shares, including any tax liability associated with therepresentation of fair market value if the election is made pursuant to Code Section 83(b).4.2 Withholding. In accordance with Section 11 of the Plan, Executive agrees to remit to the Company an amount sufficientto satisfy federal, state and local taxes (including the Executive’s FICA obligation) required to be withheld with respect to the vestingof the Shares, or otherwise to satisfy such obligation as permitted under the Plan. The Company has the right to deduct from any salaryor other payments to be made to Executive any federal, state or local taxes required by law to be so withheld.SECTION 5. MISCELLANEOUS.5.1 Not an Employment Contract. This Agreement is not an employment contract and nothing in this Agreement shall bedeemed to create in any way whatsoever any obligation on the part of Executive to remain in the service of the Company in anycapacity, or of the Company to continue Executive’s service in any capacity.5.2 Effect on Employee Benefits. Executive agrees that the Award will constitute special incentive compensation that will notbe taken into account as “salary” or “compensation” or “bonus” in determining the amount of any payment under any pension,retirement, profit sharing or other remuneration plan of the Company unless so provided in such plan.5.3 Further Assurances. The parties agree to execute such further instruments and to take such further action as mayreasonably be necessary to carry out the intent of this Agreement.5.4 Entire Agreement. This Agreement, including any exhibits, is the entire agreement of the parties with respect to thesubject matter hereof and supersedes all prior oral and written understandings of the parties.5.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State ofDelaware as applied to contracts between Delaware residents to be wholly performed within the State of Delaware.IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.EXECUTIVE HESKA CORPORATION a Delaware corporation By: Title: Address -3-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Attachment 1VESTING SCHEDULESource: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Attachment 2Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ASSIGNMENT SEPARATE FROM CERTIFICATEFOR VALUE RECEIVED, I, _____________________, hereby sell, assign and transfer unto______________________________(__________) shares of the Common Stock of Heska Corporation, standing in my name on thebooks of said corporation represented by Certificate No. herewith and do hereby irrevocably constitute and appoint totransfer said stock on the books of the within-named corporation with full power of substitution in the premises.Dated: , 20 . Signature: This Assignment Separate from Certificate was executed in conjunction with the terms of a Restricted Stock Grant Agreementbetween the above assignor and Heska Corporation, dated __________ __, 20__.Instruction:Please do not fill in any blanks other than the signature line.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.9HESKA CORPORATION2003 EQUITY INCENTIVE PLANRESTRICTED STOCK GRANT AGREEMENT(Management Incentive Plan Award)THIS AGREEMENT is made as of the _________ day of ____________, 20__ (the “Grant Date”) by and between HeskaCorporation (the “Company”) and ___________ (the “Executive”), in connection with the Executive’s election to receive a portion ofExecutive’s award under the ____ Management Incentive Plan in the form of Restricted Stock.In consideration of the mutual covenants and representations herein set forth, the Company and Executive agree as follows:SECTION 1. GRANT OF STOCK.1.1 Precedence of Plan. This Agreement is subject to and shall be construed in accordance with the terms and conditions ofthe Heska Corporation 2003 Equity Incentive Plan (the “Plan”), as now or hereinafter in effect. Any capitalized terms that are used inthis Agreement without being defined and that are defined in the Plan shall have the meaning specified in the Plan.1.2 Grant of Stock. The Company hereby grants to Executive an aggregate of ___________ shares of Restricted Stock (the“Shares”), subject to vesting as provided in Section 2.SECTION 2. UNVESTED SHARES SUBJECT TO FORFEITURE.2.1 Shares Subject to Forfeiture.a. The Shares are subject to vesting requirements as established in connection with the Management Incentive Plan,including the terms and conditions for awards made under the _____ Management Incentive Plan (the “MIP”). As described in moredetail in the MIP, up to 100% of the Shares will vest at the later of the time payments are made under the MIP (the “Payout Time”) orone (1) year from the Grant Date, and will vest as determined by dividing ___% of the Executive’s MIP Payout (as defined in the MIP)by $_____, and rounding to the nearest whole Share. Executive will forfeit all Shares that do not vest at that time.b. In the event that the Executive is an active employee through December 31, ____ and at least one (1) year from theGrant Date and Executive’s employment with the Company is terminated because of either (i) Executive's death or (ii) Executive’sDisability, up to 100% of the Shares will vest at the Payout Time as determined by dividing ___% of the Executive’s MIP Payout (asdefined in the MIP) by $_____, and rounding to the nearest whole Share. Executive will forfeit all Shares that do not vest at that time.c. Except in the cases of (i) either a Change in Control of the Company, the effect of which is governed by the MIP,or (ii) the circumstances described in subsection b. above, which is governed by subsection b. above, in the event that Executive’semployment withSource: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the Company is terminated prior to vesting, Executive will forfeit all right to the Shares. For the avoidance of doubt, in the eventExecutive’s employment is terminated due to Executive’s death on or before December 31, ____, Executive will forfeit all right to theShares but this forfeiture is not intended to dimish any MIP Payout to which Executive’s designated beneficiary is entitled, as governedby the MIP.2.2 Restriction on Transfer. Until the Shares are vested, the Shares may not be sold, transferred, pledged, assigned, orotherwise alienated or hypothecated.SECTION 3. STOCKHOLDER RIGHTS3.1 Stock Register and Certificates. The Shares will be recorded in the stock register of the Company in the name ofExecutive. If applicable, a stock certificate or certificates representing the Shares will be registered in the name of Executive, but suchcertificates shall remain in the custody of the Company. Executive shall deposit with the Company a Stock Assignment Separate fromCertificate in the form attached below as Attachment 1, endorsed in blank, so as to permit retransfer to the Company of all or a portionof the Shares that are forfeited or otherwise do not become vested in accordance with the Plan and this Agreement.3.2 Exercise of Stockholder Rights. Executive shall have the right to vote the Shares (to the extent of the voting rights of saidShares, if any), to receive and retain all regular cash dividends and such other distributions, as the Board of Directors of the Companymay, in its discretion, designate, pay or distribute on such Shares, and to exercise all other rights, powers and privileges of a holder ofCommon Stock with respect to such Shares, except as set forth in this Agreement and the Plan.3.3 Legends. Certificates, if any, representing the Shares will contain the following or other legends in the Company’sdiscretion:THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONSUPON AND OBLIGATIONS WITH RESPECT TO TRANSFER AND RIGHTS OF REPURCHASE AS SETFORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL REGISTERED HOLDER,A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.SECTION 4. RESPONSIBILITY FOR TAXES.4.1 Section 83(b) Election. Executive may complete and file with the Internal Revenue Service an election pursuant toSection 83(b) of the Internal Revenue Code to be taxed currently on the fair market value of the Shares without regard to the vestingrestrictions set forth in this Agreement. Executive shall be responsible for all taxes associated with the acceptance of the transfer of theShares, including any tax liability associated with the representation of fair market value if the election is made pursuant to CodeSection 83(b).4.2 Withholding. In accordance with Section 11 of the Plan, Executive agrees to remit to the Company an amount sufficientto satisfy federal, state and local taxes (including the Executive’s FICA obligation) required to be withheld with respect to the vestingof the Shares, or-2-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.otherwise to satisfy such obligation as permitted under the Plan. The Company has the right to deduct from any salary or otherpayments to be made to Executive any federal, state or local taxes required by law to be so withheld. SECTION 5. MISCELLANEOUS.5.1 Not an Employment Contract. This Agreement is not an employment contract and nothing in this Agreement shall bedeemed to create in any way whatsoever any obligation on the part of Executive to remain in the service of the Company in anycapacity, or of the Company to continue Executive’s service in any capacity.5.2 Effect on Employee Benefits. Executive agrees that the Award will constitute special incentive compensation that will notbe taken into account as “salary” or “compensation” or “bonus” in determining the amount of any payment under any pension,retirement, profit sharing or other remuneration plan of the Company unless so provided in such plan.5.3 Further Assurances. The parties agree to execute such further instruments and to take such further action as mayreasonably be necessary to carry out the intent of this Agreement.5.4 Entire Agreement. This Agreement, including any exhibits, is the entire agreement of the parties with respect to thesubject matter hereof and supersedes all prior oral and written understandings of the parties.5.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State ofDelaware as applied to contracts between Delaware residents to be wholly performed within the State of Delaware.IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.EXECUTIVE HESKA CORPORATION a Delaware corporation By: Title: Address -3-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Attachment 1Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ASSIGNMENT SEPARATE FROM CERTIFICATEFOR VALUE RECEIVED, I, _____________________, hereby sell, assign and transfer unto ( ) sharesof the Common Stock of Heska Corporation, standing in my name on the books of said corporation represented by Certificate No.herewith and do hereby irrevocably constitute and appoint to transfer said stock on the books of the within-namedcorporation with full power of substitution in the premises.Dated: , 20 . Signature: This Assignment Separate from Certificate was executed in conjunction with the terms of a Restricted Stock Grant Agreementbetween the above assignor and Heska Corporation, dated __________ __, 20__.Instruction:Please do not fill in any blanks other than the signature line.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.10HESKA CORPORATION2003 EQUITY INCENTIVE PLANRESTRICTED STOCK GRANT AGREEMENT(Outside Director Award)THIS AGREEMENT is made as of the _________ day of ____________, 20__ (the “Grant Date”) by and between HeskaCorporation (the “Company”) and ___________ (the “Director”).In consideration of the mutual covenants and representations herein set forth, the Company and Director agree as follows:SECTION 1. GRANT OF STOCK.1.1 Precedence of Plan. This Agreement is subject to and shall be construed in accordance with the terms and conditions ofthe Heska Corporation 2003 Equity Incentive Plan (the “Plan”), as now or hereinafter in effect. Any capitalized terms that are used inthis Agreement without being defined and that are defined in the Plan shall have the meaning specified in the Plan.1.2 Grant of Stock. The Company hereby grants to Director an aggregate of ___________ shares of Restricted Stock (the“Shares”), subject to vesting as provided in Section 2.SECTION 2. UNVESTED SHARES SUBJECT TO FORFEITURE. 2.1 Shares Subject to Forfeiture.a. The Shares will vest (the “Vesting Time”) at the latter of (i) the Company’s next Annual Meeting of Stockholders(the “Meeting”) and (ii) the one year anniversary of the Grant Date. In addition, vesting is subject to (i) the Director’s service as amember of the Company’s Board of Directors (the “Board”) through the Vesting Time, unless that Director’s current Board termexpires at the Meeting, in which case vesting is subject to the Director’s service as a member of the Company’s Board to the Meeting,and (ii) the Director not engaging in “Competition” prior to the Vesting Time. For purposes of this Agreement, Director will bedeemed to have engaged in “Competition” if Director, without the written consent of the Board, directly or indirectly (i) providesservices or assistance in any form to any individual, entity, or company providing veterinary products for the companion animal healthindustry or imaging products or services for the veterinary market (a “Restricted Company”), whether such services or assistance isprovided as an employee, consultant, agent, corporate officer, director, or otherwise or (ii) participates in the financing, operation,management, or control of, a Restricted Company. A Restricted Company includes, without limitation, Abaxis, Inc., IDEXXLaboratories, Inc., scil animal health company GmbH (currently a wholly-owned subsidiary of Henry Schein, Inc.), SoundTechnologies, Inc. (currently a wholly-owned subsidiary of VCA Inc.), and Synbiotics Corporation (currently a wholly ownedsubsidiary of Zoetis Inc.). Notwithstanding the foregoing, Director shall not be deemed to be in Competition if Director isSource: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.employed or engaged in a corporate function or senior management position (and holding commensurate equity interests) in a divisionof a Restricted Company, so long as such division is not in any way engaged in providing veterinary products for the companionanimal health industry or imaging products or services for the veterinary market and Director does not directly or indirectly provideservices or assistance to any division that does provide veterinary products for the companion animal health industry or imagingproducts or services for the veterinary market.b. In the event that the Director serves as a member of the Company’s Board for at least one (1) year from the GrantDate and Director’s service as a member of the Board is subsequently terminated because of either (i) Director’s death or (ii) Director’sDisability, the Shares will vest at the time the Director’s service as a member of the Board terminates. Furthermore, if Directorcompletes his or her Board term at the Meeting and prior to the Vesting Time and does not engage in Competition prior to the VestingTime, the Shares shall vest at the Vesting Time.c. Except in the cases of (i) either a Change in Control of the Company, in which case the Shares shall vest, or (ii) thecircumstances described in subsection b. above, which is governed by subsection b. above, in the event that Director’s service as amember of the Company’s Board is terminated prior to vesting, Director will forfeit all right to the Shares.2.2 Restriction on Transfer. Until the Shares are vested, the Shares may not be sold, transferred, pledged, assigned, orotherwise alienated or hypothecated.SECTION 3. STOCKHOLDER RIGHTS3.1 Stock Register and Certificates. The Shares will be recorded in the stock register of the Company in the name of Director.If applicable, a stock certificate or certificates representing the Shares will be registered in the name of Director, but such certificatesshall remain in the custody of the Company. Director shall deposit with the Company a Stock Assignment Separate from Certificate inthe form attached below as Attachment 1, endorsed in blank, so as to permit retransfer to the Company of all or a portion of the Sharesthat are forfeited or otherwise do not become vested in accordance with the Plan and this Agreement.3.2 Exercise of Stockholder Rights. Director shall have the right to vote the Shares (to the extent of the voting rights of saidShares, if any), to receive and retain all regular cash dividends and such other distributions, as the Board of the Company may, in itsdiscretion, designate, pay or distribute on such Shares, and to exercise all other rights, powers and privileges of a holder of CommonStock with respect to such Shares, except as set forth in this Agreement and the Plan.3.3 Legends. Certificates, if any, representing the Shares will contain the following or other legends in the Company’sdiscretion:THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONSUPON AND OBLIGATIONS WITH RESPECT TO TRANSFER AND RIGHTS OF REPURCHASE AS SETFORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL-2-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.REGISTERED HOLDER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THECOMPANY.SECTION 4. RESPONSIBILITY FOR TAXES.4.1 Section 83(b) Election. Director may complete and file with the Internal Revenue Service an election pursuant to Section83(b) of the Internal Revenue Code to be taxed currently on the fair market value of the Shares without regard to the vestingrestrictions set forth in this Agreement. Director shall be responsible for all taxes associated with the acceptance of the transfer of theShares, including any tax liability associated with the representation of fair market value if the election is made pursuant to CodeSection 83(b).4.2 Withholding. In accordance with Section 11 of the Plan, Director agrees to remit to the Company an amount sufficient tosatisfy federal, state and local taxes (including the Executive’s FICA obligation) required to be withheld with respect to the vesting ofthe Shares, or otherwise to satisfy such obligation as permitted under the Plan.SECTION 5. MISCELLANEOUS.5.1 Not an Employment Contract. This Agreement is not an employment contract and nothing in this Agreement shall bedeemed to create in any way whatsoever any obligation on the part of Director to remain in the service of the Company in anycapacity, or of the Company to continue Director’s service in any capacity.5.2 Further Assurances. The parties agree to execute such further instruments and to take such further action as mayreasonably be necessary to carry out the intent of this Agreement.5.3 Entire Agreement. This Agreement, including any exhibits, is the entire agreement of the parties with respect to thesubject matter hereof and supersedes all prior oral and written understandings of the parties.5.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State ofDelaware as applied to contracts between Delaware residents to be wholly performed within the State of Delaware.IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.DIRECTOR HESKA CORPORATION a Delaware corporation By: Title: Address -3-Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Attachment 1Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ASSIGNMENT SEPARATE FROM CERTIFICATEFOR VALUE RECEIVED, I, _____________________, hereby sell, assign and transfer unto______________________________________(______) shares of the Common Stock of Heska Corporation, standing in my name onthe books of said corporation represented by Certificate No. herewith and do hereby irrevocably constitute and appoint to transfer said stock on the books of the within-named corporation with full power of substitution in the premises.Dated: , 20 . Signature: This Assignment Separate from Certificate was executed in conjunction with the terms of a Restricted Stock Grant Agreementbetween the above assignor and Heska Corporation, dated __________ __, 20__.Instruction:Please do not fill in any blanks other than the signature line.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.11Heska Corporation 2003 Equity Incentive PlanStock Option Agreement(employees and consultants)Tax TreatmentThis option is intended to be an incentive stock option under section 422 of the Internal Revenue Codeor a nonstatutory option, as provided in the Notice of Stock Option Grant. To the extent this option isdesignated an incentive stock option and it does not qualify as an incentive stock option and it does notqualify as an incentive stock option under applicable laws, it will be treated as a nonstatutory option.Vesting/ExercisabilityThis option vests and becomes exercisable in installments, as shown in the Notice of Stock OptionGrant. In addition, in the event your service as an Employee, Director or Consultant terminates becauseof your death or Disability, your option shall become fully vested and exercisable as to the total numberof shares subject thereto immediately upon the date of your death or your Termination of Service, asapplicable.Except as otherwise provided below following a Change in Control, no additional shares become vestedafter your Termination of Service and the option shall terminate as to any shares that are unvested as ofthe end of business on the date of your Termination of Service.TermThis option expires in any event at the close of business at Company headquarters on the day before the10th anniversary of the Date of Grant, as shown in the Notice of Stock Option Grant. (It will expireearlier if your service terminates, as described below.)Regular TerminationIn the event of your Termination of Service for any reason except death or Disability, then this optionwill expire as to unexercised vested option shares at the close of business at Company headquarters onthe date three months after your termination date. The Company determines when your serviceterminates for this purpose.DeathIn the event of your Termination of Service because of your death or your death within three monthsafter your Termination of Service, then this option will expire as to unexercised vested option shares atthe close of business at Company headquarters on the date one year after your date of death.DisabilityIn the event of your Termination of Service because of your Disability, then this option will expire as tounexercised vested option shares at the close of business at Company headquarters on the date one yearafter your termination date.Leaves of AbsenceVesting of this option shall be suspended during any unpaid leave of absence unless continued vestingis required by the terms of the leave or by applicable law.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Change in ControlThis option shall vest and become exercisable in full if (i) the Company is subject to a Change inControl, (ii) this option is not continued by the Company and (iii) this option is not either assumed bythe surviving corporation or its parent or substituted for by the surviving corporation's or its parent'sissuing its own option in replacement of this option. This option shall vest and become exercisable infull if (i) the Company is subject to a Change in Control and (ii) a Termination of Service for you istriggered either (i) without Cause as part of an agreement which contemplated such Change in Controlor (ii) without your consent and without Cause. If the surviving corporation or its parent demotes you toa lower position, materially reduces your authority or responsibilities, materially reduces your totalcompensation or announces its intention to relocate your principal place of work by more than 20miles, then that action shall be treated as triggering a Termination of Service under this Agreement. Forthe avoidance of doubt, a refusal by the surviving corporation or its parent to extend a consultingengagement beyond its current term shall not be deemed to trigger any option to vest and becomeimmediately exercisable under this Agreement.“Cause” shall mean (i) your failure to perform your assigned duties or responsibilities as an Employee,Director or Consultant (other than a failure resulting from death or Disability) after notice thereof fromthe surviving corporation or its parent describing your failure to perform such duties or responsibilities;(ii) your material breach of any confidentiality agreement or invention assignment between you and theCompany or a Subsidiary; (iii) your engaging in any act of dishonesty, fraud, misrepresentation, moralturpitude, or misappropriation of material property that was or is materially injurious to the Company orits Affiliates; (iv) your violation of any federal or state regulation applicable to the Company’s business;or (v) your being convicted of, or entering a plea of nolo contendere to, any crime.Restrictions on ExerciseThe Company will not permit you to exercise this option if the issuance of shares at that time wouldviolate any law or regulation, and the Company will have no liability for failure to issue or deliver anyshares upon exercise of this option if the issuance or delivery would violate any law or regulation asdetermined by the Company in consultation with its legal counsel. This option may not be exercised fora fraction of a share.Notice of ExerciseWhen you wish to exercise this option, you must notify the Company by filing the proper “Notice ofExercise” form at the address given on the form. Your notice must specify how many shares you wishto purchase. The exercise will be effective when the Company receives the Notice of Exercise with theoption exercise payment described herein.If someone else wants to exercise this option after your death, that person must prove to the Company'ssatisfaction that he or she is entitled to do so.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Form of PaymentWhen you submit your notice of exercise, you must include payment of the option exercise price forthe shares you are purchasing. Payment may be made in one (or a combination of two or more) of thefollowing forms:● Cash, check or wire transfer.● Certificates for shares of Company stock that you own, along with any forms needed to affect atransfer of those shares to the Company. The value of the shares, determined as of the effective dateof the option exercise, will be applied to the option exercise price. However, the Company mayrestrict your ability to surrender shares of Company stock (including your ability to surrender anyparticular shares of Company Stock held by you) in payment of the exercise price if your doing sowould result in the Company's recognizing additional compensation expense with respect to thisoption for financial reporting purposes.● Irrevocable directions to a securities broker approved by the Company to sell all or part of youroption shares and to deliver to the Company proceeds from the sale in an amount sufficient to paythe option exercise price and any withholding taxes. (The balance of the sale proceeds, if any, willbe delivered to you.) The directions must be given by signing a special “Notice of Exercise” formprovided by the Company.WithholdingTaxes and Stock WithholdingYou will not be allowed to exercise this option unless you make arrangements acceptable to theCompany to pay any withholding taxes that may be due as a result of the option exercise. Thesearrangements may include (with the Company’s approval) withholding shares of Company stock thatotherwise would be issued to you when you exercise this option. The value of these shares, determinedas of the effective date of the option exercise, will be applied to the withholding taxes.Restrictions on ResaleBy signing this Agreement, you agree not to sell any option shares at a time when applicable laws,Company policies or an agreement between the Company and its underwriters prohibit a sale. Thisrestriction will apply as long as you are an Employee, Consultant or Director.Transfer of OptionPrior to your death, only you may exercise this option. You cannot sell, transfer, pledge or assign thisoption. For instance, you may not sell this option or use it as security for a loan. You may, however,dispose of this option in your will, by the laws of descent and distribution or through a beneficiarydesignation.Regardless of any marital property settlement agreement, the Company is not obligated to honor anotice of exercise from your former spouse, nor is the Company obligated to recognize your formerspouse's interest in your option in any other way.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Retention RightsNeither your option nor this Agreement gives you the right to be employed or otherwise retained by theCompany in any capacity. The Company reserves the right to terminate your service at any time, withor without cause.Stockholder RightsYou, or your estate or heirs, have no rights as a stockholder of the Company until you have exercisedthis option by giving the required notice to the Company and paying the exercise price.Applicable LawThis Agreement will be interpreted and enforced under the laws of the State of Delaware (withoutgiving effect to its conflict of laws provisions).The Plan and OtherAgreementsThe Amended and Restated 2003 Equity Incentive Plan (the “Plan”) is incorporated in this Agreementby reference. Unless otherwise defined herein, all capitalized terms herein have the same definedmeanings as in the Plan. In the event of any conflict between the terms and provisions of the Plan andthis Agreement, the Plan terms and provisions shall govern.This Agreement and the Plan constitute the entire understanding between you and the Companyregarding this option. Any prior agreements, commitments or negotiations concerning this option aresuperseded. This Agreement may be amended only by another written agreement, signed by bothparties.By signing the notice of stock option grant of this Agreement, you agree to all of the terms and conditions described above andin the Plan.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.12Heska Corporation 2003 Equity Incentive PlanNon-Qualified Stock Option Agreement(Outside Directors)Tax TreatmentThis option is intended to be a Non-qualified Stock Option and not an Incentive Stock Option undersection 422 of the Internal Revenue Code.Vesting/ExercisabilityThis option vests and becomes exercisable in installments, as shown in the Notice of Stock OptionGrant. In addition, in the event your service as an Employee, Director or Consultant terminates becauseof your death, or Disability, this option shall become fully vested and exercisable as to the total numberof shares subject thereto immediately upon the date of your death or your Termination of Service, asapplicable.Except as otherwise provided below following a Change in Control, no additional shares become vestedafter your Termination of Service and the option shall terminate as to any shares that are unvested as ofthe end of business on the date of your Termination of Service.TermThis option expires in any event at the close of business at Company headquarters on the day before the10th anniversary of the Date of Grant, as shown in the Notice of Stock Option Grant or as provided inthis Agreement or the Amended and Restated 2003 Equity Incentive Plan (the “Plan”).Regular TerminationIn the event of your Termination of Service for any reason other than death or Disability, then thisoption will expire as to unexercised vested option shares at the close of business at Companyheadquarters on the date three months after your termination date. The Company determines when yourservice terminates for this purpose.DeathIn the event of your Termination of Service because of your death or your death within three monthsafter your Termination of Service, then this option will expire as to unexercised vested option shares atthe close of business at Company headquarters on the date one year after your date of death.DisabilityIn the event of your Termination of Service because of your Disability, then this option will expire as tounexercised vested option shares at the close of business at Company headquarters on the date one yearafter your termination date.Leaves of AbsenceVesting of this option shall be suspended during any unpaid leave of absence unless continued vestingis required by the terms of the leave or by applicable law.1Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Change in ControlThis option shall vest and become exercisable in full if (i) the Company is subject to a Change inControl, (ii) this option is not continued by the Company and (iii) this option is not either assumed bythe surviving corporation or its parent or substituted for by the surviving corporation's or its parent'sissuing its own option in replacement of this option. This option shall vest and become exercisable infull if (i) the Company is subject to a Change in Control and (ii) a Termination of Service for you istriggered either (i) without Cause as part of an agreement which contemplated such Change in Controlor (ii) without your consent and without Cause. If the surviving corporation or its parent demotes you toa lower position, materially reduces your authority or responsibilities, materially reduces your totalcompensation or announces its intention to relocate your principal place of work by more than 20miles, then that action shall be treated as triggering a Termination of Service under this Agreement. Forthe avoidance of doubt, a refusal by the surviving corporation or its parent to extend a consultingengagement beyond its current term shall not be deemed to trigger any option to vest and becomeimmediately exercisable under this Agreement.“Cause” shall mean (i) your failure to perform your assigned duties or responsibilities as an Employee,Director or Consultant (other than a failure resulting from death or Disability) after notice thereof fromthe surviving corporation or its parent describing your failure to perform such duties or responsibilities;(ii) your material breach of any confidentiality agreement or invention assignment agreement betweenyou and the Company or a Subsidiary; (iii) your engaging in any act of dishonesty, fraud,misrepresentation, moral turpitude, or misappropriation of material property that was or is materiallyinjurious to the Company or its Affiliates; (iv) your violation of any federal or state regulationapplicable to the Company's business; of (v) your being convicted of, or entering a plea of nolocontendere to, any crime.2Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Restrictions on ExerciseThe Company will not permit you to exercise this option if the issuance of shares at that time wouldviolate any law or regulation, and the Company will have no liability for failure to issue or deliver anyshares upon exercise of this option if the issuance or delivery would violate any law or regulation asdetermined by the Company in consultation with its legal counsel. No shares shall be issued pursuant tothis option unless and until any then applicable requirements of state or federal laws and regulatoryagencies have been fully complied with to the satisfaction of the Company and its counsel. This optionmay not be exercised for a fraction of a share.Notice of ExerciseWhen you wish to exercise this option, you must notify the Company by filing the proper “Notice ofExercise” form at the address given on the form. Your Notice of Exercise must specify how manyshares you wish to purchase. The exercise will be effective when the Company receives the Notice ofExercise with the option exercise payment described herein.If someone else wants to exercise this option after your death, that person must prove to the Company'ssatisfaction that he or she is entitled to do so.Form of PaymentWhen you submit your Notice of Exercise, you must include payment of the option exercise price forthe shares you are purchasing. Payment may be made in one (or a combination of two or more) of thefollowing forms:● Cash, check or wire transfer.● Certificates for shares of Company stock that you own, along with any forms needed to affect atransfer of those shares to the Company. The value of the shares, determined as of the effective dateof the option exercise, will be applied to the option exercise price. However, the Company mayrestrict your ability to surrender shares of Company stock (including your ability to surrender anyparticular shares of Company Stock held by you) in payment of the exercise price if your doing sowould result in the Company's recognizing additional compensation expense with respect to thisoption for financial reporting purposes.● Irrevocable directions to a securities broker approved by the Company to sell all or part of youroption shares and to deliver to the Company proceeds from the sale in an amount sufficient to paythe option exercise price and any withholding taxes. (The balance of the sale proceeds, if any, willbe delivered to you.) The directions must be given by signing a special “Notice of Exercise” formprovided by the Company.Withholding Taxes andStockYou will not be allowed to exercise this option unless you make arrangements acceptable to theCompany to pay any withholding taxes that may be due as a result of the option exercise. Thesearrangements3Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Withholdingmay include (with the Company's approval) withholding shares of Company stock that otherwise wouldbe issued to you when you exercise this option. The value of these shares, determined as of theeffective date of the option exercise, will be applied to the withholding taxes.Restrictions on ResaleBy signing this Agreement, you agree not to sell any option shares at a time when applicable laws,Company policies or an agreement between the Company and its underwriters prohibit a sale. Thisrestriction will apply as long as you are an Employee, Consultant or Director.Transfer of OptionPrior to your death, only you may exercise this option. You cannot sell, transfer, pledge or assign thisoption. For instance, you may not sell this option or use it as security for a loan. You may, however,dispose of this option in your will, by the laws of descent and distribution or through a beneficiarydesignation.Regardless of any marital property settlement agreement, the Company is not obligated to honor anotice of exercise from your former spouse, nor is the Company obligated to recognize your formerspouse's interest in your option in any other way.Retention RightsNeither your option nor this Agreement gives you the right to be employed or otherwise retained by theCompany in any capacity. The Company reserves the right to terminate your service at any time, withor without cause.Stockholder RightsYou, or your estate or heirs, have no rights as a stockholder of the Company until you have exercisedthis option by giving the required notice to the Company and paying the exercise price.Applicable LawThis Agreement will be interpreted and enforced under the laws of the State of Delaware (withoutgiving effect to its conflict of laws provisions).The Plan and OtherAgreementsThe Plan is incorporated in this Agreement by reference. Unless otherwise defined herein, allcapitalized terms herein have the same defined meanings as in the Plan. In the event of any conflictbetween the terms and provisions of the Plan and this Agreement, the Plan terms and provisions shallgovern.This Agreement and the Plan constitute the entire understanding between you and the Companyregarding this option. Any prior agreements, commitments or negotiations concerning this option aresuperseded. This Agreement may be amended only by another written agreement, signed by bothparties.4Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.AcceptanceYou hereby acknowledge receipt of a copy of the Plan and this Agreement. You have read andunderstand the terms and provisions thereof, and accept this option subject to all the terms andconditions of the Plan and this Agreement. You acknowledge that there may be adverse taxconsequences upon exercise of this option or disposition of the underlying shares and that you shouldconsult a tax advisor prior to such exercise or disposition.By signing the Notice of Stock Option Grant, you agree to all of the terms and conditions described above and in the Plan.5Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.15HESKA CORPORATIONDIRECTOR COMPENSATION POLICYNon-employee directors of Heska Corporation, a Delaware corporation (the "Company") shall receive the followingcompensation for their service as a member of the Board of Directors (the "Board") of the Company:Cash Compensation Annual Retainer for General Board ServiceEffective January 1, 2013, each non-employee director shall be entitled to an annual cash retainer in the amount of $40,000 (the"Annual Retainer"). The Company shall pay the Annual Retainer on a quarterly basis in advance on the first day of the calendar quarter,subject to the non-employee director's continued service to the Company as a non-employee director on such date.Annual Retainer for Specific Role ServiceCommencing January 1, 2016, any non-employee director who serves in a specified role shall be entitled to an annual cashretainer in an amount specified in the table below (the "Service Retainer"). The Company shall pay each Service Retainer on a quarterlybasis in advance on the first day of the calendar quarter, subject to the applicable non-employee director's continued service to theCompany in the corresponding role on such date.RoleService RetainerChair of the Board$12,000Lead Director$10,000Audit Chair$20,000Compensation Chair$12,000Corporate Governance Chair$7,500Audit Member$10,000Compensation Member$6,000Corporate Governance Member$3,000Note: Non-employee directors are not to be paid a Chair and Member fee for service on the same committee.Equity CompensationAnnual AwardCommencing with the 2017 Annual Meeting of Stockholders, each non-employee director elected to the Board and each othercontinuing non-employee director shall automatically receive an annual grant (the "Annual Grant") of stock valued at $60,000 (the"Equity Value") based on the fair market value of the Company’s common stock at the end of the day of grant which shall be the dateof each Company Annual Meeting of Stockholders, subject to such grant covering a maximum of 5,000 shares (the "Share Cap"). EachAnnual Grant shall vest (the "Vesting Time") in full on the latter of (i) the one year anniversary of the date of grant and (ii) theCompany’s Annual Meeting of Stockholders for the year following theSource: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.year of grant for the award (the "Vesting Meeting"), subject to (i) the non-employee director's continued service to the Companythrough the Vesting Time, unless the non-employee director’s current term expires at the Vesting Meeting in which case vesting issubject to the non-employee director’s service to the Vesting Meeting and (ii) the non-employee director not engaging in “competition”,as defined in a restricted stock agreement to be executed by the non-employee director, to the Vesting Time. An Annual Grant may vestearly in certain circumstances related to the death or disability of a non-employee director.Initial AwardBeginning on February 23, 2017, any new non-employee directors appointed or elected to our Board between Annual Meetingsof Stockholders shall automatically receive a grant of stock (the "Initial Grant") valued at the Equity Value based on the fair marketvalue of the Company’s common stock at the end of the day of grant, adjusted pro rata for the time until the next Annual Meeting ofStockholders, subject to the Share Cap adjusted pro rata for the time until the next Annual Meeting of Stockholders. The Initial Grantshall vest (the "Initial Time") in full on the latter of (i) the one year anniversary of the date of grant and (ii) the Company’s next AnnualMeeting of Stockholders (the "Initial Meeting"), subject to (i) the non-employee director's continued service to the Company throughthe Initial Time, unless the non-employee director’s current term expires at the Initial Meeting in which case vesting is subject to thenon-employee director’s service to the Initial Meeting and (ii) the non-employee director not engaging in “competition”, as defined in arestricted stock agreement to be executed by the non-employee director, to the Initial Time. An Initial Grant may vest early in certaincircumstances related to the death or disability of a non-employee director.Provisions Applicable to All Non-Employee Director Option GrantsAll grants shall be subject to the terms and conditions of the Company's 1997 Stock Incentive Plan or 2003 Equity IncentivePlan, as applicable, and the terms of the Stock Option Agreement issued thereunder.For purposes of this Director Compensation Policy, the "value" for Initial Grants and Annual Grants to non-employee directorsshall be determined in accordance with the Company's option valuation policy in place at the time of grant for financial reportingpurposes.Expense Reimbursement All non-employee directors shall be entitled to reimbursement from the Company for their reasonable travel (including airfareand ground transportation), lodging and meal expenses incident to meetings of the Board or committees thereof or in connection withother Board related business. The Company shall also reimburse directors for attendance at director continuing education programs thatare relevant to their service on the Board and which attendance is pre-approved by the Chair of the Corporate Governance Committeeand Chairman of the Board. The Company shall make reimbursement to a non-employee director within a reasonable amount of timefollowing submission by the non-employee director of reasonable written substantiation for the expenses.Amended and Restated February 23, 2017Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 21.1SUBSIDIARIES OF COMPANYDiamond Animal Health, Inc., an Iowa corporationHeska Imaging US, LLC, a Delaware Limited Liability Company (54.6% owned)Heska Imaging International, LLC, a Delaware Limited Liability CompanyHeska Imaging Global, LLC, a Delaware Limited Liability CompanyHeska AG, a corporation incorporated under the laws of SwitzerlandSensor Devices, Inc., a Wisconsin Corporation (inactive)Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in Heska Corporation’s Registration Statements on Form S-8 (File Nos. 333-30951, 333-34111, 333-47129, 333-72155, 333-38138, 333-39448, 333-55112, 333-82096, 333-89738, 333-102871, 333-106679,333-112701, 333-115995, 333-123196, 333-132916, 333-141737, 333-194120, 333-194122, 333-195734, 333-204036 and 333-211567) of our report dated March 3, 2017, relating to the consolidated financial statements and the effectiveness of internal controlover financial reporting of Heska Corporation, which appears in this Annual Report on Form 10-K.EKS&H LLLPMarch 3, 2017Denver, ColoradoSource: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 31.1 CERTIFICATION I, Kevin S. Wilson, certify that: 1.I have reviewed this annual report on Form 10-K of Heska Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith 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 allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented 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 inExchange 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 designedunder our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;andc.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting. Dated: March 3, 2017/s/ Kevin S. Wilson KEVIN S. WILSON Chief Executive Officer and President (Principal Executive Officer)Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 31.2 CERTIFICATION I, John McMahon, certify that:1.I have reviewed this annual report on Form 10-K of Heska Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith 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 allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented 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 inExchange 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 designedunder our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared;b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;andc.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting. Dated: March 3, 2017/s/ John McMahon JOHN MCMAHON Vice President, Chief Financial Officer (Principal Financial Officer)Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICERPURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Kevin S. Wilson, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that the Annual Report of Heska Corporation on Form 10-K for the year ended December 31, 2016 fully complies with therequirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-K fairlypresents in all material respects the financial condition and results of operations of Heska Corporation. Dated: March 3, 2017By:/s/ Kevin S. Wilson Name:KEVIN S. WILSON Title:Chief Executive Officer and President I, John McMahon, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that the Annual Report of Heska Corporation on Form 10-K for the year ended December 31, 2016 fully complies with therequirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-K fairlypresents in all material respects the financial condition and results of operations of Heska Corporation. Dated: March 3, 2017By:/s/ John McMahon Name:JOHN MCMAHON Title:Vice President, Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to Heska Corporation and will be retained byHeska Corporation and furnished to the Securities and Exchange Commission or its staff upon request.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: HESKA CORP, 10-K, March 06, 2017Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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