10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

or

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

For the transition period from _________________ to _______________________

Commission file number: 000-22427

HESKA CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	77-0192527
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3760 Rocky Mountain Avenue Loveland, Colorado	80538
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code: (970) 493-7272

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $0.01 par value	HSKA	The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒  No ☐

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

Large Accelerated Filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller Reporting Company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

10,424,924 shares of the Registrant's Public Common Stock, $.01 par value, were outstanding at May 4, 2021.

TABLE OF CONTENTS 

			Page
PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements	1
		Condensed Consolidated Balance Sheets	1
		Condensed Consolidated Statements of Income (Loss)	2
		Condensed Consolidated Statements of Comprehensive Loss	3
		Condensed Consolidated Statements of Stockholders' Equity	4
		Condensed Consolidated Statements of Cash Flows	5
		Notes to Condensed Consolidated Financial Statements	6
		Note 1, Operations and Summary of Significant Accounting Policies	6
		Note 2, Revenue	8
		Note 3, Acquisitions and Related Party Items	11
		Note 4, Investments in Unconsolidated Affiliates	15
		Note 5, Income Taxes	16
		Note 6, Leases	17
		Note 7, Earnings Per Share	18
		Note 8, Goodwill and Other Intangibles	19
		Note 9, Property and Equipment, Net	20
		Note 10, Inventories	20
		Note 11, Accrued Liabilities	21
		Note 12, Capital Stock	21
		Note 13, Accumulated Other Comprehensive Income	22
		Note 14, Commitments and Contingencies	22
		Note 15, Interest and Other Expense (Income), Net	23
		Note 16, Convertible Notes	23
		Note 17, Notes Receivable	25
		Note 18, Segment Reporting	26
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
	Item 4.	Controls and Procedures	40
PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings	40
	Item 1A.	Risk Factors	40
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
	Item 6.	Exhibits	41
		Signatures	44

HESKA, scil, ALLERCEPT, HemaTrue, Solo Step, Element DC, Element HT5, Element POC, Element i, Element i+, Element COAG, Element DC5X and Element RC, Element RCX, Element RCX3 and scil vet, scil academy, scil vIP, scil ABC are registered trademarks of Heska Corporation and/or it's affiliates. DRI-CHEM is a registered trademark of FUJIFILM Corporation. TRI-HEART is a registered trademark of Intervet Inc., d/b/a Merck Animal Health, formerly known as Schering-Plough Animal Health Corporation ("Merck Animal Health"), which is a unit of Merck & Co., Inc., in the United States and is a registered trademark of Heska Corporation in other countries. This quarterly report on Form 10-Q also refers to trademarks and trade names of other organizations.

-i-

Our Certificate of Incorporation, as amended (the “Charter”), authorizes three classes of stock: Original Common Stock, Public Common Stock, and Preferred Stock. Pursuant to an NOL Protective Amendment to the Charter adopted in 2010, all shares of Original Common Stock then outstanding were automatically reclassified into shares of Public Common Stock. Our Public Common Stock trades on the Nasdaq Stock Market LLC. In this Quarterly Report on Form 10-Q, references to “Public Common Stock” and “Common Stock” are references to our Public Common Stock, unless the context otherwise requires.

-ii-

Statement Regarding Forward Looking Statements

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

•the impact of the COVID-19 pandemic on consumer demand, our global supply chain and our financial and operational results;

•the success of third parties in marketing our products;

•outside business interests of our Chief Executive Officer;

•our reliance on third party suppliers and collaborative partners;

•our dependence on key personnel;

•our dependence upon a number of significant customers;

•competitive conditions in our industry;

•our dependence on third parties to successfully develop new products;

•our ability to market and sell our products successfully;

•expansion of our international operations;

•the impact of regulation on our business;

•the success of our acquisitions and other strategic development opportunities;

•our ability to develop, commercialize and gain market acceptance of our products;

•cybersecurity incidents and related disruptions and our ability to protect our stakeholders’ privacy;

•product returns or liabilities;

•volatility of our stock price;

•our ability to service our convertible notes and comply with their terms.

Readers are cautioned not to place undue reliance on these forward-looking statements.

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

-iii-

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HESKA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

	March 31,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	238,455	$	86,334
Accounts receivable, net of allowance for losses of $760 and $769, respectively	29,891		31,080
Inventories	39,357		40,037
Net investment in leases, current, net of allowance for losses of $209 and $192, respectively	4,933		4,794
Prepaid expenses	4,485		3,875
Other current assets	5,641		5,155
Total current assets	322,762		171,275
Property and equipment, net	34,863		35,542
Operating lease right-of-use assets	5,089		5,457
Goodwill	89,968		88,276
Other intangible assets, net	53,879		55,992
Deferred tax asset, net	16,758		5,694
Net investment in leases, non-current	15,939		15,789
Investments in unconsolidated affiliates	6,518		6,704
Related party convertible note receivable, net	6,709		6,671
Promissory note receivable from investee, net	8,743		—
Other non-current assets	8,345		8,439
Total assets	$	569,573	$	399,839
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	14,958	$	15,119
Accrued liabilities	14,920		18,055
Operating lease liabilities, current	2,015		2,087
Deferred revenue, current, and other	5,893		6,854
Total current liabilities	37,786		42,115
Convertible note, non-current, net	83,721		48,459
Deferred revenue, non-current	4,483		4,667
Other long-term borrowings	566		554
Operating lease liabilities, non-current	3,571		3,858
Deferred tax liability	11,432		11,856
Other liabilities	2,741		1,277
Total liabilities	144,300		112,786
Stockholders' equity:
Preferred stock, $.01 par value, 2,500,000 shares authorized, none issued or outstanding	—		—
Common stock, $.01 par value, 13,250,000 shares authorized, respectively, none issued or outstanding	—		—
Public common stock, $.01 par value, 13,250,000 shares authorized, 10,417,964 and 9,475,845 shares issued and outstanding, respectively	104		95
Additional paid-in capital	562,008		423,650
Accumulated other comprehensive income	8,786		14,169
Accumulated deficit	(145,625)		(150,861)
Total stockholders' equity	425,273		287,053
Total liabilities and stockholders' equity	$	569,573	$	399,839

See accompanying notes to condensed consolidated financial statements.

-1-

HESKA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended March 31,
	2021		2020
Revenue, net	$	60,503	$	30,654
Cost of revenue	35,033		17,206
Gross profit	25,470		13,448
Operating expenses:
Selling and marketing	10,907		7,380
Research and development	1,186		2,128
General and administrative	12,359		8,558
Total operating expenses	24,452		18,066
Operating income (loss)	1,018		(4,618)
Interest and other expense, net	526		2,199
Income (loss) before income taxes and equity in losses of unconsolidated affiliates	492		(6,817)
Income tax expense (benefit):
Current income tax expense	641		25
Deferred income tax benefit	(2,206)		(1,533)
Total income tax benefit	(1,565)		(1,508)
Net income (loss) before equity in losses of unconsolidated affiliates	2,057		(5,309)
Equity in losses of unconsolidated affiliates	(186)		(130)
Net income (loss) after equity in losses of unconsolidated affiliates	1,871		(5,439)
Net loss attributable to redeemable non-controlling interest	—		(151)
Net income (loss) attributable to Heska Corporation	$	1,871	$	(5,288)
Basic earnings (loss) per share attributable to Heska Corporation	$	0.20	$	(0.70)
Diluted earnings (loss) per share attributable to Heska Corporation	$	0.19	$	(0.70)
Weighted average outstanding shares used to compute basic earnings (loss) per share attributable to Heska Corporation	9,478		7,568
Weighted average outstanding shares used to compute diluted earnings (loss) per share attributable to Heska Corporation	9,844		7,568

See accompanying notes to condensed consolidated financial statements.

-2-

HESKA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands) 

(unaudited)

	Three Months Ended March 31,
	2021		2020
Net income (loss) after equity in losses of unconsolidated affiliates	$	1,871	$	(5,439)
Other comprehensive loss:
Translation adjustments and losses from intra-entity transactions	(5,383)		(356)
Comprehensive loss	(3,512)		(5,795)
Comprehensive loss attributable to redeemable non-controlling interest	—		(151)
Comprehensive loss attributable to Heska Corporation	$	(3,512)	$	(5,644)

See accompanying notes to condensed consolidated financial statements.

-3-

HESKA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands) 

(unaudited)

	Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders' Equity
Three Months Ended March 31, 2020 and 2021	Shares	Amount		Shares	Amount
Balances, December 31, 2019	—	$	—	7,882	$	79	$	290,216	$	513	$	(136,444)	$	154,364
Adoption of accounting standards	—	—		—	—		—		—		(18)		(18)
Balances, January 1, 2020, as adjusted	—	—		7,882	79		290,216		513		(136,462)		154,346
Net loss attributable to Heska Corporation	—	—		—	—		—		—		(5,288)		(5,288)
Issuance of common stock, net of shares withheld for employee taxes	—	—		(39)	(1)		(201)		—		—		(202)
Issuance of preferred stock, net of issuance costs	122	1		—	—		121,784		—		—		121,785
Stock-based compensation	—	—		—	—		353		—		—		353
Other comprehensive loss	—	—		—	—		—		(356)		—		(356)
Balances, March 31, 2020	122	$	1	7,843	$	78	$	412,152	$	157	$	(141,750)	$	270,638
Balances, December 31, 2020	—	$	—	9,476	$	95	$	423,650	$	14,169	$	(150,861)	$	287,053
Adoption of accounting standards	—	—		—	—		(29,834)		—		3,365		(26,469)
Balances, January 1, 2021, as adjusted	—	—		9,476	95		393,816		14,169		(147,496)		260,584
Net income attributable to Heska Corporation	—	—		—	—		—		—		1,871		1,871
Issuance of common stock, net of forfeitures and shares withheld for employee taxes	—	—		1	—		178		—		—		178
Equity offering, net of issuance costs	—	—		941	9		164,177		—		—		164,186
Stock-based compensation	—	—		—	—		3,837		—		—		3,837
Other comprehensive loss	—	—		—	—		—		(5,383)		—		(5,383)
Balances, March 31, 2021	—	$	—	10,418	$	104	$	562,008	$	8,786	$	(145,625)	$	425,273
Note: The quarter ended March 31, 2020 excludes amounts related to redeemable non-controlling interests recorded in mezzanine equity.

See accompanying notes to condensed consolidated financial statements.

-4-

HESKA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2021		2020
Cash flows from operating activities:
Net income (loss) after equity in losses from unconsolidated affiliates	$	1,871	$	(5,439)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization	3,571		1,374
Non-cash impact of operating leases	526		408
Deferred income tax benefit	(2,206)		(1,533)
Stock-based compensation	3,837		353
Equity in losses of unconsolidated affiliates	186		130
Accretion of discounts and issuance costs	22		1,524
Other losses	207		42
Changes in operating assets and liabilities (net of the effect of acquisitions):
Accounts receivable	858		(1,092)
Inventories	(1,818)		(3,081)
Other assets	(893)		(429)
Accounts payable	153		837
Other liabilities	(4,977)		2,145
Net cash provided by (used in) operating activities	1,337		(4,761)
Cash flows from investing activities:
Acquisition of CVM	—		(14,420)
Acquisition of Lacuna, net of cash acquired	(3,882)		—
Promissory note receivable issuance	(9,000)		—
Purchases of property and equipment	(262)		(210)
Proceeds from disposition of property and equipment	13		—
Net cash used in investing activities	(13,131)		(14,630)
Cash flows from financing activities:
Payment of stock issuance costs	(217)		(158)
Preferred stock proceeds	—		122,000
Proceeds from issuance of common stock	165,357		336
Repurchase of common stock	(679)		(538)
Repayments of other debt	(106)		(10)
Net cash provided by financing activities	164,355		121,630
Foreign exchange effect on cash and cash equivalents	(440)		(24)
Net increase (decrease) in cash and cash equivalents	152,121		102,215
Cash and cash equivalents, beginning of period	86,334		89,030
Cash and cash equivalents, end of period	$	238,455	$	191,245
Supplemental disclosure of cash flow information:
Non-cash transfers of equipment between inventory and property and equipment, net	$	1,549	$	553
Accrued stock issuance costs	$	97	$	56
Contingent consideration for acquisition	$	1,700	$	—
Indemnity holdback for acquisition	$	370	$	—

See accompanying notes to condensed consolidated financial statements.

-5-

HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.    OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Heska Corporation and its wholly-owned subsidiaries ("Heska", the "Company", "we" or "our") sell veterinary and animal health diagnostic and specialty products. Our offerings include Point of Care diagnostic laboratory instruments and supplies; digital imaging diagnostic products, software and services; digital cytology services; vaccines; local and cloud-based data services; allergy testing and immunotherapy; and single-use offerings such as in-clinic diagnostic tests and heartworm preventive products. Our core focus is on supporting veterinarians in the canine and feline healthcare space.

Basis of Presentation and Consolidation

The accompanying interim Condensed Consolidated Financial Statements are unaudited. The interim unaudited Condensed Consolidated Financial Statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include normal, recurring adjustments, necessary to present fairly the financial position of the Company as of March 31, 2021, and the results of our operations, statements of stockholders' equity, and cash flows for the three months ended March 31, 2021 and 2020.

The unaudited Condensed Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. Our unaudited Condensed Consolidated Financial Statements include our accounts and the accounts of our wholly-owned subsidiaries since their respective dates of acquisitions. All intercompany accounts and transactions have been eliminated in consolidation. Where our ownership of a subsidiary is less than 100%, the non-controlling interest is reported on our Condensed Consolidated Balance Sheets. The non-controlling interest in our consolidated net income is reported as "Net loss attributable to redeemable non-controlling interest" on our Condensed Consolidated Statements of Income (Loss). The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year or any future period, particularly in light of the COVID-19 pandemic and its effects on the domestic and global economies as described below. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and other financial information filed with the SEC.

Beginning in the first quarter of 2020, to limit the spread of COVID-19, governments took various actions including the issuance of stay-at-home policies and social distancing procedures and guidelines, causing some businesses to adjust, reduce or suspend business and operating activities. Veterinary care is widely recognized as an "essential" service for pet owners, and veterinarians continued to deliver essential medical care for sick and injured pets. The stay-at-home policies deployed early in 2020 to combat the spread of COVID-19 resulted in a decrease in companion animal clinical visits, including delay of elective procedures and wellness visits and as a result lowers demand for diagnostic testing services. Beginning in the second quarter of 2020, certain local, state and federal governments began to ease the stay-at-home policies and allowed more businesses and facilities to re-open, leading to a recovery in companion animal clinical visits and associated demand for our diagnostic products. During the fourth quarter of 2020 and into the first quarter of 2021, increased restrictions, mainly in the European Union, certain parts of Canada and Australia, in which we operate, re-emerged. The extent to which the continuation, or another wave outbreak of COVID-19, or an outbreak of other health epidemics could impact our business, results of operations and financial condition, including the potential for write-offs or impairments of assets and suspension of capital investments, will depend on future developments. We are unable to predict with certainty the effects of the COVID-19

-6-

HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

pandemic on our customers, suppliers and vendors, as well as the actions of governments, and when and to what extent normal economic and operating conditions can resume; these effects may differ from those assumed in our projected estimates. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business, mainly in our ability to place new capital equipment, as a result of any economic impact that has occurred or may occur in the future.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are required when establishing the allowance for credit losses and the net realizable value of inventory; determining future costs associated with warranties provided; determining the period over which our obligations are fulfilled under agreements to license product rights and/or technology rights; evaluating long-lived and intangible assets and investments for estimated useful lives and impairment; estimating the useful lives and standalone selling prices of instruments under leasing arrangements; determining the allocation of purchase price under purchase accounting; estimating the expense associated with the granting of stock; determining the need for, and the amount of a valuation allowance on deferred tax assets; determining the fair value of our embedded derivatives; and determining the value of the non-controlling interest in a business combination. Our actual results may differ from these estimates and there may be changes to those estimates in future periods.

Critical Accounting Policies

Our accounting policies are described in our audited Consolidated Financial Statements and Notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020, and other than the recently adopted accounting pronouncements described below have not changed materially since such filing.

Adoption of New Accounting Pronouncements

Effective January 1, 2021, we adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740, and also clarifies and amends existing guidance to improve consistent application. We evaluated the impact of the standard on our consolidated financial statements and the adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

Effective January 1, 2021, we adopted ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this ASU clarify the interaction between the accounting for investments in equity securities, investments in equity method and certain derivatives instruments. The ASU is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. We evaluated the impact of the standard on our consolidated financial statements and the adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

Effective January 1, 2021, we early adopted ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40), which simplifies the accounting for certain convertible instruments. The update reduces the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible debt will be accounted for as a single liability measured at its amortized cost and convertible preferred stock will be accounted for as

-7-

HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. The update also requires the if-converted method to be used for convertible instruments and the effect of potential share settlement be included in the diluted earnings per share calculation when an instrument may be settled in cash or shares.

The Company's 3.75% Convertible Senior Notes due 2026 (the "Notes") are a convertible instrument with a cash-conversion feature that is accounted for within the scope of ASC 470-20 and impacted by the adoption of ASU 2020-06. The Company has elected to apply the modified retrospective method wherein the Company recognized a cumulative-effect adjustment to the opening balance of retained earnings (January 1, 2021). Further, the Company will not restate EPS in prior periods. The Company calculated the cumulative-effect adjustment as of January 1, 2021 by comparing (i) the historical amortization schedule for the Notes through December 31, 2020 and (ii) an updated amortization schedule wherein the conversion feature within the Notes would not be separated as an equity component and subsequently recognized as non-cash interest expense under ASC 835-30. As a result of ASU 2020-06, while cash interest expense is not impacted, non-cash interest accretion is limited to the amortization of debt issuance costs under ASC 835-30. Therefore, the Company prepared its transition journal entries by (i) reversing the conversion feature amount recorded in APIC and (ii) reversing the difference in non-cash interest expense via retained earnings. The adoption resulted in a decrease to accumulated deficit of $3.4 million, a decrease to additional paid-in capital of $29.8 million, and an increase to convertible note, non-current, net of $35.2 million. Additionally, due to the adoption, the Company reversed the remaining balance of the net deferred tax liability of $8.8 million, which was initially recorded in connection with the Notes.

Effective January 1, 2021, we adopted ASU 2020-10, Codification Improvements, which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC's regulations. We evaluated the impact of the standard on our consolidated financial statements and the adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

2.     REVENUE

We separate our goods and services among two reportable segments, North America and International. The two segments consist of revenue originating from:

•North America: including the United States, Canada and Mexico

•International: all geographies outside North America, currently consisting primarily of Australia, France, Germany, Italy, Malaysia, Spain and Switzerland

Refer to Note 18 for further detail regarding the change in reportable segments which required recast of prior period presentation.

-8-

HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table summarizes our segment revenue (in thousands):

	Three Months Ended March 31,
	2021		2020
North America Revenue:
POC Lab Instruments & Other	$	1,970	$	1,372
POC Sales-type leases	1,018		1,244
POC Lab Consumables	16,951		13,686
POC Imaging	6,688		3,496
PVD	6,864		4,504
OVP	3,781		3,348
Total North America Revenue	$	37,272	$	27,650
International Revenue:
POC Lab Instruments & Other	$	1,766	$	235
POC Sales-type leases	640		—
POC Operating Leases	608		—
POC Lab Consumables	12,225		560
POC Imaging	6,658		1,358
PVD	1,334		851
Total International Revenue	$	23,231	$	3,004
Total Revenue	$	60,503	$	30,654

Remaining Performance Obligations

Remaining performance obligations represent the aggregate transaction price allocated to performance obligations with an original contract term greater than one year which are fully or partially unsatisfied at the end of the period. Remaining performance obligations include noncancelable purchase orders, the non-lease portion of minimum purchase commitments under long-term supply arrangements, extended warranty, service and other long-term contracts. Remaining performance obligations do not include revenue from contracts with customers with an original term of one year or less, revenue from long-term supply arrangements with no minimum purchase requirements, revenue expected from purchases made in excess of the minimum purchase requirements, or revenue from instruments leased to customers. While the remaining performance obligation disclosure is similar in concept to backlog, the definition of remaining performance obligations excludes leases and contracts that provide the customer with the right to cancel or terminate for convenience with no substantial penalty, even if historical experience indicates the likelihood of cancellation or termination is remote. Additionally, the Company has elected to exclude contracts with customers with an original term of one year or less from remaining performance obligations.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

As of March 31, 2021, the aggregate amount of the transaction price allocated to remaining minimum performance obligations was approximately $148.8 million. As of March 31, 2021, the Company expects to recognize revenue as follows (in thousands):

Year Ending December 31,	Revenue
2021 (remaining)	$	26,196
2022	32,891
2023	29,476
2024	24,369
2025	18,276
Thereafter	17,580
	$	148,788

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled contract assets, deferred revenue, and customer deposits and billings in excess of revenue recognized. In addition, the Company defers certain costs incurred to obtain contracts.

Contract Assets

Certain unbilled amounts related to long-term contracts for which we provide a free term to the customer are recorded in "Other current assets" and "Other non-current assets" on the accompanying Condensed Consolidated Balance Sheets. The collection of these balances occurs over the term of the underlying contract. The balances as of March 31, 2021 were $1.2 million and $4.1 million for current and non-current assets, respectively, shown net of related unearned interest. The balances as of December 31, 2020 were $1.2 million and $4.1 million for current and non-current assets, respectively, shown net of related unearned interest.

Contract Liabilities

The Company receives cash payments from customers for licensing fees or other arrangements that extend for a specified term. These contract liabilities are classified as either current or long-term in the Condensed Consolidated Balance Sheets based on the timing of when the Company expects to recognize revenue. As of March 31, 2021 and December 31, 2020, contract liabilities were $8.4 million and $8.9 million, respectively, and are included within "Deferred revenue, current, and other" and "Deferred revenue, non-current" in the accompanying Condensed Consolidated Balance Sheets. The decrease in the contract liability balance during the three-month period ended March 31, 2021 is approximately $1.7 million of revenue recognized during the period, offset by approximately $1.2 million of additional deferred sales in 2021. Contract liabilities are reported on the accompanying Condensed Consolidated Balance Sheets on a contract-by-contract basis.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

3.    ACQUISITIONS AND RELATED PARTY ITEMS

Lacuna Acquisition

On February 1, 2021, the Company completed the acquisition of Lacuna Diagnostics, Inc. ("Lacuna"), a veterinary digital cytology company, to broaden the Company's point of care diagnostic offerings. The Company acquired 100% of the issued and outstanding shares of Lacuna for a purchase price of $4.3 million. The Company then dissolved Lacuna on February 1, 2021. In accordance with the purchase agreement, the Company is required to hold a $0.4 million general indemnity holdback that is intended to provide a non-exclusive source of funds for the payment of any losses identified and shall be released within 18 months of closing. As additional consideration for the shares, the Company agreed to a contingent earn-out of an additional $2.0 million based on the achievement of certain performance metrics within a twelve month period ("Initial Earn Out Period"), reducing to $1.0 million if such metrics were met in a twelve month period subsequent to the Initial Earn Out Period. The fair value of the contingent consideration as of the acquisition date was $1.7 million.

The total purchase consideration exceeded the fair value of the identifiable net assets acquired, resulting in $3.9 million of goodwill, primarily related to expanded opportunities with our offerings. All of the goodwill is allocated to the North America segment and is not tax deductible for income tax purposes.

The acquisition was accounted for as a business combination in accordance with ASC 805. As such, the total purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of February 1, 2021.

The information below represents the preliminary purchase price allocation as of the acquisition date (in thousands):

	February 1, 2021
Purchase price	$	4,255
Fair value of contingent consideration	1,700
Total purchase consideration	$	5,955
Cash and cash equivalents	3
Accounts receivable	170
Property and equipment, net	530
Other intangible assets, net	1,185
Deferred tax asset	167
Total assets acquired	2,055
Goodwill	3,900
Total fair value of consideration transferred	$	5,955

The Company's preliminary estimates of fair values of the net assets acquired are based on the information that was available at the date of the acquisition, and the Company is continuing to evaluate the underlying inputs and assumptions used in its valuations. Accordingly, these preliminary estimates are subject to change during the measurement period, which is up to one year from the date of the acquisition.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Intangible assets acquired, amortization method and estimated useful life as of February 1, 2021, was as follows (dollars in thousands):

	Useful Life	Amortization Method	Fair Value
Developed technology	3 years	Straight-line	$	1,000
Customer relationships	6 months	Straight-line	150
Trade name	11 months	Straight-line	35
Total intangible assets acquired			$	1,185

Pro forma financial information related to the acquisition of Lacuna has not been provided as it is not material to our consolidated results of operations.

scil Acquisition

On April 1, 2020, the Company completed the acquisition of scil animal care company GmbH (“scil”) from Covetrus, Inc. The Company purchased 100% of the capital stock of scil for an aggregate price of $110.3 million in cash. The acquisition represents a key milestone in the Company's long-term strategic plan, creating a global veterinary diagnostics company with leadership positions in key geographic markets. The purchase price exceeded the identifiable net assets, resulting in goodwill of $46.0 million, primarily attributable to the synergies expected from the expanded market opportunities with our offerings and the experienced workforce acquired. Of the goodwill acquired, $37.3 million is allocated to our International segment and $8.7 million is allocated to our North America segment. All of the goodwill is tax deductible for purposes of calculating Controlled Foreign Corporation ("CFC") tested income, which may result in a decrease to the Company's future U.S. federal tax liability.

The acquisition was accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. As such, the total purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of April 1, 2020. As of March 31, 2021, the Company has finalized the accounting for the acquisition.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The information below represents the final purchase price allocation of scil (in thousands):

	April 1, 2020
Total purchase consideration	$	110,290
Cash and cash equivalents	5,889
Accounts receivable	10,707
Inventories	11,278
Net investment in leases, current	311
Prepaid expenses	1,692
Other current assets	1,338
Property and equipment, net	19,320
Operating lease right-of-use assets	877
Other intangible assets, net	44,517
Net investment in leases, non-current	1,027
Investments in unconsolidated affiliates	55
Other non-current assets	291
Total assets acquired	97,302
Accounts payable	8,221
Accrued liabilities	7,067
Operating lease liabilities, current	356
Deferred revenue, current, and other	3,220
Deferred revenue, non-current	94
Operating lease liabilities, non-current	529
Deferred tax liability	13,249
Other liabilities	276
Net assets acquired	64,290
Goodwill	46,000
Total fair value of consideration transferred	$	110,290

Per the tax indemnification included in the purchase agreement of scil, the seller has indemnified the Company for $1.1 million related to uncertain tax positions taken in prior years. The outcome of this arrangement will either be settled or expire due to lapse of statute of limitations by 2027. As of March 31, 2021, approximately $0.7 million of the indemnification agreement remains outstanding.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Intangible assets acquired, amortization method and estimated useful life as of April 1, 2020, was as follows (dollars in thousands):

	Useful Life	Amortization Method	Fair Value
Customer relationships	10 years	Straight-line	$	36,272
Internally developed software	7 years	Straight-line	353
Backlog	0.2 years	Straight-line	210
Non-compete agreements	2 years	Straight-line	60
Trade name subject to amortization	0.8 years	Straight-line	66
Trademarks and trade names not subject to amortization	n/a	Indefinite	7,556
Total intangible assets acquired			$	44,517

Unaudited Pro Forma Financial Information

The following tables present unaudited supplemental pro forma financial information as if the acquisition had occurred on January 1, 2019 (in thousands):

	Three Months Ended March 31, 2020
Revenue, net	$	49,205
Net (loss) income before equity in losses of unconsolidated affiliates	$	(6,125)
Net (loss) income attributable to Heska Corporation	$	(6,104)

The pro forma financial information presented above has been prepared by combining our historical results and the historical results of scil and further reflects the effect of purchase accounting adjustments, including: (i) amortization of acquired intangible assets, (ii) the impact of certain fair value adjustments such as depreciation on the acquired property, plant and equipment, and (iii) historical intercompany sales between the Company and scil. The unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what actual results of operations would have been if the acquisition had occurred as the beginning of the period presented, nor are they indicative of future results of operations.

Other Related Party Activities

CVM Diagnostico Veternario S.L. and CVM Ecografia S.L. (“CVM”, collectively) conduct related party activities with Practice Clinicas Veterinarias Moviles, S.L. ("CVM Practice"), which is owned by CVM's management. CVM leases two warehouses from CVM Practice. CVM Practice charged CVM $8 thousand and $0 during the three months ended March 31, 2021 and 2020, respectively, all of which is related to lease payments. The right-of-use asset and lease liability amounts related to the warehouse leases were approximately $0.2 million as of both March 31, 2021 and December 31, 2020.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

4.    INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The carrying values of investments in unconsolidated affiliates, categorized by type of investment, is as follows (in thousands):

	March 31, 2021		December 31, 2020
Equity method investment	$	3,500	$	3,686
Non-marketable equity security investment	3,018		3,018
Investment in Unconsolidated Affiliates	$	6,518	$	6,704

Equity Method Investment

On September 24, 2018, the Company invested approximately $5.1 million, including costs, to acquire an equity interest in a business as part of its product development strategy. As of March 31, 2021, the Company's ownership interest in the business was 29.1%. In connection with the investment, the Company entered into a Manufacturing Supply Agreement that grants the Company global exclusivity to specified products to be delivered under the agreement for a 15-year period that begins upon the Company's receipt and acceptance of an initial order under the agreement. The Company accounts for this investment using the equity method of accounting. Under the equity method, the carrying value of the investment is adjusted for the Company's proportionate share of the investee's reported earnings or losses with the corresponding share of earnings or losses reported as Equity in losses of unconsolidated affiliates, listed below Net income before equity in losses of unconsolidated affiliates within the Condensed Consolidated Statements of Income (Loss).

Non-Marketable Equity Security Investment

On August 8, 2018, the Company invested approximately $3.0 million, including costs, in exchange for preferred stock. The Company’s investment is a non-marketable equity security, recorded using the measurement alternative of cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes.

As part of the agreement, the Company entered into a Supply and License Agreement, which provides that the investee produce and commercialize products that will enhance the Company's diagnostic portfolio. As part of this agreement, the Company made an upfront payment of $1.0 million related to a worldwide exclusive license agreement over a 20-year period, recorded in both short and long-term other assets. In addition, the agreement provides for an additional contingent payment of $10.0 million, relating to the successful achievement of sales milestones. This potential future milestone payment has not yet been accrued as it is not deemed by the Company to be probable at this time.

Both parties in this arrangement are active participants and are exposed to significant risks and rewards dependent on the commercial success of the activities of the collaboration. The parties are actively working on developing and testing the product as well as funding the research and development. Heska classifies the amounts paid for research and development work within the North America segment research and development operating expenses. Expense is recognized ratably when incurred and in accordance with the development plan.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

5.    INCOME TAXES

The Company's total income tax expense (benefit) for our income (loss) before income taxes were as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Income (loss) before income taxes and equity in losses of unconsolidated affiliates	$	492	$	(6,817)
Total income tax benefit	$	(1,565)	$	(1,508)

There were cash payments for income taxes, net of refunds, of $496 thousand for the three months ended March 31, 2021 and there were cash payments of $7 thousand for income taxes for the three months ended March 31, 2020. The Company’s tax benefit was $1.6 million for the three months ended March 31, 2021 compared to the tax benefit of $1.5 million for the three months ended March 31, 2020. The increase in tax benefit in the three-month period is due to the tax benefit received from the partial release of the valuation allowance and excess tax benefits from employee stock compensation. The Company recognized $0.5 million in excess tax benefits related to employee share-based compensation for the three months ended March 31, 2021, compared to $0.3 million recognized for the three months ended March 31, 2020.

As of March 31, 2021, the Company had a deferred tax asset of approximately $9.4 million from net operating losses and tax credits and a net partial valuation allowance of approximately $4.4 million recorded against these deferred tax assets. In the first quarter, the Company released approximately $1.1 million of the partial valuation allowance against tax credits expiring in years after December 31, 2021. The release was due to future financial income forecasts showing the utilization of these credits.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

6.    LEASES

Lessee Accounting

The Company leases buildings, office equipment, and vehicles. The following table summarizes the Company's operating and finance lease balances (in thousands):

Leases	Balance Sheet Location	March 31, 2021		December 31, 2020
Assets
Operating	Operating lease right-of-use assets	$	5,089	$	5,457
Finance	Property and equipment, net	1,745		1,907
Total Leased Assets		$	6,834	$	7,364
Liabilities
Operating	Operating lease liabilities, current	$	2,015	$	2,087
	Operating lease liabilities, non-current	3,571		3,858
Finance	Deferred revenue, current, and other	229		295
	Other liabilities	224		261
Total Lease Liabilities		$	6,039	$	6,501

Lessor Accounting

The following table summarizes the profit recognized on the commencement date for sales-type leases and lease income for equipment-only operating leases (in thousands):

	Three Months Ended
	March 31,
	2021		2020
Sales-type lease revenue	$	1,658	$	1,244
Sales-type lease cost of revenue	1,264		869
Profit recognized at commencement for sales-type leases	$	394	$	375
Operating lease income	$	608	$	—

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

7.    EARNINGS PER SHARE

The following is a reconciliation of the weighted-average shares outstanding used in the calculation of basic and diluted earnings per share ("EPS") for the three months ended March 31, 2021 and 2020 (in thousands, except per share data):

	Three Months Ended March 31,
	2021		2020
Net income (loss) attributable to Heska Corporation	$	1,871	$	(5,288)
Basic weighted-average common shares outstanding	9,478		7,568
Dilutive effect of stock options and restricted stock awards	366		—
Diluted weighted-average common shares outstanding	9,844		7,568
Basic earnings (loss) per share attributable to Heska Corporation	$	0.20	$	(0.70)
Diluted earnings (loss) per share attributable to Heska Corporation	$	0.19	$	(0.70)

The following potentially outstanding common shares from convertible preferred stock, convertible senior notes, stock options and restricted stock awards were excluded from the computation of diluted EPS because the effect would have been antidilutive (in thousands):

	Three Months Ended March 31,
	2021	2020
Convertible preferred stock	—	1,509
Convertible Senior Notes	996	43
Stock options and restricted stock	—	135
	996	1,687

As more fully described in Note 16, the Company's Notes are convertible under certain circumstances, as defined in the indenture, into a combination of cash and shares of the Company's common stock. As discussed in Note 1, the Company adopted ASU 2020-06, effective January 1, 2021, which amends certain guidance on the computation of EPS for convertible instruments. Prior to the adoption of ASU 2020-06, the Company used the treasury stock method when calculating the potential dilutive effect of the conversion feature of the Notes on earnings per share, if any. Under ASU 2020-06, the treasury stock method is no longer available, and entities must apply the if-converted method for convertible instruments and the effect of potential share settlement must be included in the diluted earnings per share calculation when an instrument may be settled in cash or shares. To determine the dilutive effect to earnings per share using the if-converted method, interest expense on the outstanding Notes is added back to the diluted earnings per share numerator and all of the potentially dilutive shares are included in the diluted earnings per share denominator. For the three months ended March 31, 2021, all of the potentially issuable shares with respect to the Notes were excluded from the calculation of diluted net earnings per share because the effect was anti-dilutive. The Company has elected to apply the modified retrospective method of adoption and will not restate EPS for the prior period.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

8.    GOODWILL AND OTHER INTANGIBLES

The following summarizes the change in goodwill during the three months ended March 31, 2021 (in thousands):

	North America		International		Total
Carrying amount, December 31, 2020	$	35,414	$	52,862	$	88,276
Goodwill attributable to acquisitions (subject to change)	3,900		—		3,900
Foreign currency adjustments	—		(2,208)		(2,208)
Carrying amount, March 31, 2021	$	39,314	$	50,654	$	89,968

Other intangibles consisted of the following (in thousands):

	March 31, 2021						December 31, 2020
	Gross Carrying Amount		Accum. Amortiz.		Net Carrying Amount		Gross Carrying Amount		Accum. Amortiz.		Net Carrying Amount
Intangible assets subject to amortization:
Customer relationships and other	$	45,636	$	(7,551)	$	38,085	$	46,989	$	(6,436)	$	40,553
Developed technology	9,647		(1,971)		7,676		8,669		(1,696)		6,973
Trade names	227		(118)		109		197		(105)		92
Intangible assets not subject to amortization:
Trade names	8,009		—		8,009		8,374		—		8,374
Total intangible assets	$	63,519	$	(9,640)	$	53,879	$	64,229	$	(8,237)	$	55,992

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

	Three Months Ended March 31,
	2021		2020
Amortization expense	$	1,404	$	428

The remaining weighted-average amortization period for intangible assets is approximately 8.3 years.

Estimated amortization expense related to intangibles for each of the five years from 2021 (remaining) through 2025 and thereafter is as follows (in thousands):

Year Ending December 31,
2021 (remaining)	$	4,683
2022	6,038
2023	5,677
2024	5,245
2025	5,190
Thereafter	19,037
Total amortization related to finite-lived intangible assets	$	45,870
Indefinite-lived intangible assets	8,009
Net intangible assets	$	53,879

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

No triggering events were identified in the first quarter of 2021 to require additional impairment testing.

9.    PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Land	$	2,493	$	2,590
Building	12,310		12,737
Machinery and equipment	41,559		40,411
Office furniture and equipment	2,033		2,047
Computer hardware and software	4,885		4,773
Leasehold and building improvements	10,728		10,728
Construction in progress	49		4
Property and equipment, gross	74,057		73,290
Less accumulated depreciation	(39,194)		(37,748)
Total property and equipment, net	$	34,863	$	35,542

The Company has subscription agreements whereby its instruments in inventory may be placed at a customer's location on a rental basis. For instruments classified as operating leases, the cost of these instruments is transferred to machinery and equipment and depreciated, typically over a 5 to 7 year period depending on the circumstance under which the instrument is placed with the customer. Our cost of instruments under operating leases as of March 31, 2021 and December 31, 2020, was $14.4 million and $13.6 million, respectively, before accumulated depreciation of $5.0 million and $4.7 million, respectively.

Depreciation expense was $1.9 million and $0.9 million for the three months ended March 31, 2021 and 2020, respectively.

10.    INVENTORIES

Inventories consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Raw materials	$	13,028	$	14,454
Work in process	4,204		4,262
Finished goods	22,125		21,321
Total inventories	$	39,357	$	40,037

Inventories are measured on a first-in, first-out basis and stated at lower of cost or net realizable value.

-20-

HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

11.    ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Accrued payroll and employee benefits	$	5,961	$	7,949
Accrued property taxes	547		659
Accrued purchase orders	1,126		1,549
Accrued taxes	3,882		3,731
Other	3,404		4,167
Total accrued liabilities	$	14,920	$	18,055

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

12.    CAPITAL STOCK

During the three months ended March 31, 2021, the Company granted the following stock options and restricted stock awards:

	Three Months Ended March 31, 2021
	Options/Awards Granted	Weighted-Average Grant Date Fair Value (per option/award)
Stock options	—	$	—
Restricted stock awards	235	$	154.48

The restricted stock awards granted during the three months ended March 31, 2021 contain only time-based vesting terms. The fair value was measured based on the number of shares granted and the closing market price of our common stock on the date of grant and will be expensed over the corresponding requisite service period.

2021 Equity Offering

On March 5, 2021, the Company completed a public offering of 940,860 shares of common stock, $0.01 par value per share, at a public offering price of $186.00 per share. The Company received net proceeds of approximately $164.2 million after deducting underwriting discounts and commissions and issuance costs. The Company granted the underwriters an option to purchase up to an additional 141,129 shares of common stock from the Company at the offering price of $186.00 per share (less the underwriting discounts and commissions), within 30 days of the Prospectus Supplement dated March 2, 2021. The Company evaluated the accounting treatment of the option under ASC 815-40, Derivatives and Hedging - Contracts on an Entity's Own Equity, and determined that it meets the criteria for equity treatment thereunder. The underwriters’ option was not exercised and expired on April 1, 2021. The Company anticipates using the net proceeds of the offering for general corporate purposes, including working capital, further development and potential commercialization of current and future product initiatives, collaborations, and capital expenditures. The Company may also use a portion of the net proceeds of this offering to fund possible investments in or acquisitions of complementary businesses, products or technologies, or to repay indebtedness.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

13.    ACCUMULATED OTHER COMPREHENSIVE INCOME

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

	Pension Adjustments		Foreign Currency Translation1		Foreign Currency Gain (Loss) on Intra-Entity Transactions2		Total Accumulated Other Comprehensive Income
Balances at December 31, 2020	$	(386)	$	5,872	$	8,683	$	14,169
Current period other comprehensive loss	—		(2,271)		(3,112)		(5,383)
Balances at March 31, 2021	$	(386)	$	3,601	$	5,571	$	8,786

1 Foreign currency gains and losses related to translation of foreign subsidiary financial statements.

2 The Company has intercompany loans of a long-term investment nature that are denominated in a foreign currency. These transactions are considered to be of a long-term nature if settlement is not planned or anticipated in the foreseeable future.

14.    COMMITMENTS AND CONTINGENCIES

Warranties

The Company's current terms and conditions of sale include a limited warranty that its products and services will conform to published specifications at the time of shipment and a more extensive warranty related to certain products. The Company also sells a renewal warranty for certain of its products. The typical remedy for breach of warranty is to repair or replace any defective product, and if not possible or practical, the Company will accept the return of the defective product and refund the amount paid. Historically, the Company has incurred minimal warranty costs. The Company's warranty reserve was $0.5 million and $0.5 million as of March 31, 2021 and December 31, 2020, respectively.

Litigation

From time to time, the Company may be involved in litigation relating to claims arising out of its operations. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred, and the amount can be reasonably estimated.

On February 18, 2020, a former managing director of scil filed a claim disputing the effective date of the termination of his management service agreement and the validity of the Company´s waiver of his two-year post-contractual non-compete obligation. The Company intends to defend itself against the claim. Whether or not this will be successful depends on complex facts and circumstances. The Company is, based on the advice of its legal counsel, confident that it will be successful in evidencing the effective date of the termination of the management service agreement and as such, no accrual has been recorded for this ongoing litigation. Additionally, the Company is indemnified by the scil acquisition agreement for this claim.

As of March 31, 2021, the Company was not a party to any other legal proceedings that were expected, individually or in the aggregate, to have a material adverse effect on its business, financial condition, or operating results.

Off-Balance Sheet Commitments

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

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Purchase Obligations

The Company has contractual obligations with suppliers for unconditional annual minimum inventory purchases in the amounts of $50.1 million as of March 31, 2021.

15.    INTEREST AND OTHER EXPENSE (INCOME), NET

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

	Three Months Ended March 31,
	2021		2020
Interest income	$	(389)	$	(233)
Interest expense	920		2,346
Other (income) expense, net	(5)		86
Total interest and other expense, net	$	526	$	2,199

Cash paid for interest for the three months ended March 31, 2021 and 2020 was $1.6 million and $1.6 million, respectively.

16.    CONVERTIBLE NOTES

Convertible Notes

On September 17, 2019, the Company issued $86.25 million aggregate principal amount of 3.750% Convertible Senior Notes due 2026 (the "Notes"), which included the exercise in full of an $11.25 million purchase option, to certain financial institutions as the initial purchasers of the Notes (the "Initial Purchasers"). The Company pays interest on the Notes semiannually in arrears at a rate of 3.750% per annum on March 15 and September 15 of each year. The Notes are senior unsecured obligations of the Company. The Notes were issued pursuant to an Indenture, dated September 17, 2019 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee. The net proceeds from the sale of the Notes were approximately $83.7 million after deducting the Initial Purchasers' discounts and the offering expenses payable by the Company.

Refer to Note 16, Convertible Notes, in the Notes to Consolidated Financial Statements included in Part II, Item 8 of the Company's 2020 Form 10-K for further information on the Notes.

No portion of the Notes was converted during the three months ended March 31, 2021 and the liability component was classified as long-term debt on the Company's Condensed Consolidated Balance Sheet as of March 31, 2021.

As discussed in Note 1, the Company early adopted ASU 2020-06, effective January 1, 2021, which simplifies the accounting for certain convertible instruments. Under the new standard, qualifying convertible debt is accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. As a result of ASU 2020-06, the Company's cash interest expense is not impacted, however, the Company's non-cash interest accretion is limited to the amortization of debt issuance costs under ASC 835-30. The new effective interest rate of the Notes post-adoption is 4.35%. The Company also reversed the conversion feature amount recorded in APIC and reversed the difference in non-cash interest expense via retained earnings.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table summarizes the net carrying amount of the Notes (in thousands):

	March 31, 2021		December 31, 2020
Principal amount of the Notes	$	86,250	$	86,250
Unamortized debt discount	(2,529)		(37,791)
Net carrying amount	$	83,721	$	48,459

Interest expense related to the Notes is comprised of the amortization of the debt discount and debt issuance costs and the contractual coupon interest as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Interest expense related to contractual coupon interest	$	809	$	809
Interest expense related to amortization of the debt discount	102		1,524
	$	911	$	2,333

As of March 31, 2021, the remaining period over which the unamortized discount will be amortized is 66.0 months.

The estimated fair value of the Notes was $180.4 million and $156.9 million as of March 31, 2021 and December 31, 2020, respectively, determined through consideration of quoted market prices in less active markets. The fair value measurement is classified as Level 2 in the fair value hierarchy, which is defined in ASC 820 as inputs other than quoted prices in active markets that are either directly or indirectly observable. Based on our closing stock price of $168.46 on March 31, 2021, the if-converted value exceeded the aggregate principal amount of the Notes by $81.5 million.

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HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

17.    NOTE RECEIVABLES

Convertible Promissory Note

On December 9, 2020, the Company's equity method investee (the “Investee”), issued a Convertible Promissory Note to the Company (the “Convertible Promissory Note”) with a principal amount of $6.65 million and a stated interest rate of 3.0% per annum that is payable monthly. The Convertible Promissory Note has a maturity date of December 9, 2023, or otherwise upon qualified redemption event or in the event of a default. Refer to Note 4 for additional information on our equity method investment.

The conversion of the Convertible Promissory Note is contingent upon certain events. Due to the convertible debt features included in the Convertible Promissory Note, it is not an equity security and is therefore not considered an additional investment in our equity method investee. The Company accounted for the transaction as a note receivable, included in Related party convertible note receivable, net on the Consolidated Balance Sheets. The note receivable will be measured at amortized cost and evaluated for credit losses each reporting period. The Company determined that the redemption features described above met the definition of an embedded derivative that requires bifurcation from the note receivable host. The Company measured the redemption features at fair value, with the residual proceeds paid allocated to the note receivable host, creating a discount to the note receivable. The discount will be amortized over the contractual term of the Convertible Promissory Note using the effective interest method. The effective interest rate of the Convertible Promissory Note is 8.69%, and the amortization of the discount will be included as interest income within Interest and other expense (income), net on the Consolidated Statements of Income.

The carrying value of the note receivable, included in Related party convertible note receivable, net on the Consolidated Balance Sheets, is as follows (in thousands):

	March 31, 2021		December 31, 2020
Principal amount	$	6,650	$	6,650
Unamortized discount	(903)		(977)
Net carrying amount	$	5,747	$	5,673

The fair value of the embedded derivative was $1.0 million as of March 31, 2021 and December 31, 2020, and is included in Related party convertible note receivable, net on the Consolidated Balance Sheets. The fair value of the derivative will be remeasured each reporting period, with the mark-to-market adjustment to be included in other expense (income) on the Consolidated Statements of Income. In addition, the Company recorded an allowance for expected credit losses on the promissory note of $33 thousand as of March 31, 2021.

Promissory Note

On February 1, 2021, one of the Company's equity investees (the "Investee"), which the Company accounts for as a nonmarketable equity security, issued a Promissory Note to the Company (the “Promissory Note”) with a principal amount of $9.0 million and a stated interest rate of 10.0% per annum that is payable monthly. The Promissory Note has a maturity date of December 1, 2024 and provides for interest only payments through December 1, 2023. Beginning on January 1, 2024, the Promissory Note requires repayment of the principal and interest over twelve consecutive monthly payments. As additional consideration, the Company

HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

was also issued a warrant to acquire securities of the Investee that expires December 31, 2034. Refer to Note 4 for additional information on our equity investments.

The Company evaluated the accounting treatment of the warrant to acquire securities and determined is a freestanding instrument that meets the definition of an embedded derivative under ASC 815 and requires bifurcation from the note receivable host. The Company measured the warrant at fair value, with the residual proceeds paid allocated to the note receivable host, creating a discount to the note receivable. The discount will be amortized over the contractual term of the Promissory Note using the effective interest method. The effective interest rate of the Promissory Note is 10.99%, and the amortization of the discount will be included as interest income within Interest and other expense (income), net on the Consolidated Statements of Income.

The carrying value of the note receivable, included in Other non-current assets on the Consolidated Balance Sheets, is as follows (in thousands):

	March 31, 2021		December 31, 2020
Principal amount	$	9,000	$	—
Unamortized discount	(298)		—
Net carrying amount	$	8,702	$	—

The fair value of the embedded derivative was $0.3 million at issuance and as of March 31, 2021, and is included in Other non-current assets on our Consolidated Balance Sheets. The fair value of the derivative will be remeasured each reporting period, with the mark-to-market adjustment to be included in other expense (income) on the Consolidated Statements of Income. In addition, the Company recorded an allowance for expected credit losses on the note receivable of $0.3 million as of March 31, 2021.

18.    SEGMENT REPORTING

On April 1, 2020, Heska completed the acquisition of scil. Following this acquisition, the Company restructured its operating segments based on how the Chief Operating Decision Maker (“CODM”) manages the business, allocates resources, makes operating decisions and evaluates operating performance. The CODM changed how he assesses performance and allocates resources based on geographic regions in order to better align with the global operations of the Company. Based on this change, the Company determined it has two reportable segments and revised prior comparative periods to conform to the current period segment presentation. The Company’s two segments are North America and International.

The North America segment is comprised of the Company's operations in the United States, Canada and Mexico and the International segment is comprised of geographies outside of North America, which are the Company's operations primarily in Australia, France, Germany, Italy, Malaysia, Spain and Switzerland. Certain expenses incurred at the Company’s headquarters located in the North America segment are allocated to each segment in a manner consistent with where the benefits from the expenses are derived. However, there are certain corporate expenses included in the North America segment that the Company does not allocate. Such expenses include research and development, certain selling, marketing, general, and administrative costs that support the global organization. Sales and transfers between operating segments are accounted for at market-based transaction prices and are eliminated in consolidation. The Company's sales are determined by the country of origin where the sale occurred. For a description of Heska's previous operating segments, refer to Note 17 to the consolidated financial statements included in Part II. Item 8 of Heska's Annual Report on Form 10-K for the year ended December 31, 2019.

Our CODM continues to evaluate segment performance and allocate resources based on Revenue, Cost of Revenue, Gross Profit, Gross Margin and Operating Income. The CODM does not evaluate operating

HESKA CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

segments using asset information; however, we have included total asset information by segment below as there was a material change in total assets by segment as of March 31, 2021 due to the acquisition of scil.

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

Three Months Ended March 31, 2021	North America			International			Total
Total revenue	$	37,272		$	23,231		$	60,503
Cost of revenue	19,763			15,270			35,033
Gross profit	17,509			7,961			25,470
Gross margin	47		%	34		%	42		%
Operating income (loss)	1,033			(15)			1,018

Three Months Ended March 31, 2020	North America			International			Total
Total revenue	$	27,650		$	3,004		$	30,654
Cost of revenue	15,146			2,060			17,206
Gross profit	12,504			944			13,448
Gross margin	45		%	31		%	44		%
Operating loss	(4,093)			(525)			(4,618)

Asset information by reportable segment as of March 31, 2021 is as follows (in thousands):

As of March 31, 2021	North America		International		Total
Total assets	$	413,913	$	155,660	$	569,573

Asset information by reportable segment as of December 31, 2020 is as follows (in thousands):

As of December 31, 2020	North America		International		Total
Total assets	$	238,550	$	161,289	$	399,839

Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and related Notes included in Part I Item 1 of this Form 10-Q.

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This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, that involve risks and uncertainties, and can generally be identified by our use of the words "scheduled," "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," and variations of such words and similar expressions. Such statements, which include statements concerning future revenue sources and concentration, international market expansion, gross profit margins, selling and marketing expenses, remaining minimum performance obligations, research and development expenses, general and administrative expenses, capital resources, financings or borrowings and additional losses, are subject to risks and uncertainties, including, but not limited to, those discussed under the caption "Risk Factors" contained in Part I, Item 1A of our Annual Report on Form 10-K that could cause actual results to differ materially from those projected. The Risk Factors and others described in the Company’s periodic and current reports filed with the SEC from time to time are not necessarily all of the important factors that could cause the Company’s actual results to differ materially from those projected. The forward-looking statements set forth in this Form 10-Q are as of the close of business on May 5, 2021 and we undertake no duty and do not intend to update this information, except as required by applicable laws. If we updated one or more forward looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. See “Statement Regarding Forward Looking Statements.”

Overview

We sell advanced veterinary diagnostic and specialty products. Our offerings include Point of Care laboratory instruments and consumables; Point of Care digital imaging diagnostic instruments; digital cytology services; vaccines; local and cloud-based data services; allergy testing and immunotherapy; and single-use offerings such as in-clinic diagnostic tests and heartworm preventive products. Our core focus is on supporting veterinarians in the canine and feline healthcare space.

Point of Care laboratory instruments and other sales include outright instrument sales, revenue recognized from sales-type lease treatment, and other revenue sources, such as charges for repairs. Revenue from Point of Care laboratory consumables primarily involves placing an instrument under contract in the field and generating future revenue from testing consumables, such as cartridges and reagents, as that instrument is used. Instruments placed under subscription agreements are considered operating or sales-type

leases, depending on the duration and other factors of the underlying agreement. 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 Point of Care laboratory and other non-imaging instruments and consumables are supplied by third parties, who typically own the product rights and supply the product to

us under marketing and/or distribution agreements. In many cases, we have collaborated with a third party to adapt a human instrument for veterinary use. Major products in this area include our instruments for chemistry, hematology, blood gas and immunodiagnostic testing and their affiliated operating consumable.

Radiography is the largest product offering in Point of Care imaging, which includes digital and computed radiography and ultrasound instruments. Radiography solutions typically consist of a combination of hardware and software placed with a customer, often combined with an ongoing service and support contract. Our experience has been that most of the revenue is generated at the time of sale in this area, in contrast to the Point of Care diagnostic laboratory placements discussed above where ongoing consumable revenue is often a larger component of economic value as a given instrument is used.

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Pharmaceuticals, Vaccines and Diagnostic ("PVD") revenue, includes single use diagnostic and other tests, pharmaceuticals and biologicals as well as research and development, licensing and royalty revenue. Since items in this area are often single use by their nature, our typical aim is to build customer satisfaction and loyalty for each product, generate repeat annual sales from existing customers and expand our customer base in the future. Products in this area are both supplied by third parties and provided by us. Major products and services in this area include heartworm diagnostic tests and preventives, and allergy test kits, allergy

immunotherapy and testing.

Other Vaccines and Pharmaceuticals ("OVP") revenue is generated in our USDA, FDA and DEA licensed production facility in Des Moines, Iowa. We view this facility as an asset which could allow us to control our cost of goods on any pharmaceuticals and vaccines that we may commercialize in the future. We have increased integration of this facility with our operations elsewhere. For example, virtually all of our U.S. inventory, excluding our imaging products, is stored at this facility and related fulfillment logistics are managed there. Our OVP revenue includes vaccines and pharmaceuticals produced for third parties. OVP is attributable only to the North America segment.

All of our products are ultimately sold primarily to or through veterinarians. In many cases, veterinarians will mark up their costs to their customers. The acceptance of our products by veterinarians is critical to our success. These products are sold directly to end users by us as well as through distribution relationships, such as the sale of kits to conduct blood testing to third-party veterinary diagnostic laboratories and sales to independent third-party distributors. Revenue from direct sales and distribution relationships represented 70% and 30%, respectively, of revenue for the three months ended March 31, 2021 and 67% and 33%, respectively, for the three months ended March 31, 2020.

Segment Change

During the second quarter of 2020, following the scil acquisition, the chief operating decision maker (“CODM”) changed how he assesses performance and allocates resources based on geographic regions. As a result, the Company determined it has two operating and reportable segments: North America and International. North America consists of the United States, Canada and Mexico. International consists of geographies outside of North America, primarily our operations in Australia, France, Germany, Italy, Malaysia, Spain and Switzerland. The Company's core strategic focus on point of care laboratory and imaging products is included in both segments. The North America segment also includes the contract manufacturing

of vaccines and pharmaceutical products. The Company revised prior comparative periods to conform to the current period segment presentation. Refer to Note 18 - Segment Reporting to the consolidated financial statements included in Part II. Item 8 of our 2020 Annual Report on Form 10-K for further information.

Impact of COVID-19 Pandemic and Current Economic Environment

Beginning in the first quarter of 2020, to limit the spread of COVID-19, governments took various actions including the issuance of stay-at-home policies and social distancing procedures and guidelines, causing some businesses to adjust, reduce or suspend business and operating activities. Veterinary care is widely recognized as an "essential" service for pet owners, and veterinarians continued to deliver essential medical care for sick and injured pets. The stay-at-home policies deployed early in 2020 to combat the spread of COVID-19 resulted in a decrease in companion animal clinical visits, including delay of elective procedures and wellness visits and as a result lower demand for diagnostic testing services. Beginning in the second quarter of 2020, certain local, state and federal governments began to ease the stay-at-home policies and allowed more businesses and facilities to re-open, leading to a recovery in companion animal clinical visits and associated demand for our diagnostic products. During the fourth quarter of 2020 and into the first quarter of 2021, increased restrictions, mainly in the European Union, certain parts of Canada and Australia, in which we operate, re-emerged. The extent to which the continuation, or another wave outbreak of COVID-19, or an

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outbreak of other health epidemics could impact our business, results of operations and financial condition, including the potential for write-offs or impairments of assets and suspension of capital investments, will depend on future developments. We are unable to predict with certainty the effects of the COVID-19 pandemic on our customers, suppliers and vendors, as well as the actions of governments, and when and to what extent normal economic and operating conditions can resume; these effects may differ from those assumed in our projected estimates. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business, mainly in our ability to place new capital equipment, primarily under long-term contracts, as a result of any economic impact that has occurred or may occur in the future.

As a result of social distancing measures, on-site installations of POC Lab and Imaging equipment continue to experience intermittent delays. While not significant to the overall results of the of the year, on-site installations of equipment have been impacted since March 2020. However, our financial position remains strong. On March 5, 2021, we completed a public offering of shares of common stock. As a result, we have sufficient liquidity to sustain our operations and do not anticipate a need to access additional capital outside of the various programs available to our overseas subsidiaries.

While we have experienced some intermittent delays in receiving supply and a slight increase in shipping costs, our supply chain has not been significantly impacted. Our major research and development projects are continuing to progress substantially as planned but we have experienced sporadic delays in receiving validation samples and device components as well as inefficiencies in remote collaboration and field-testing.

We do not know how long COVID-19 related challenges will continue. The ultimate impact on our business will depend on many factors substantially beyond our control and difficult to predict. In the near-term and with asynchronous variation across geographies, we anticipate veterinary hospitals may temporarily delay capital equipment investments as a result of heightened conservatism and the effects of social distancing on in-clinic demonstrations and installations. Despite these headwinds, we believe we are well positioned because: (1) our customers and products are essential, (2) our main Point of Care laboratory business continues to show healthy consumables use and margin, (3) our subscriptions model metrics continue to show solid performance, (4) our vaccines and pharmaceuticals business continues to perform with minimal disruption, (5) our balance sheet is strong, and (6) our employees, logistics, supply chain, and operations continue to operate well in the current environment and they are fully prepared for both a phased return and an instant return to full capacity.

Results of Operations

Our analysis presented below is organized to provide the information we believe will facilitate an understanding of our historical performance and relevant trends going forward.

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The following table sets forth, for the periods indicated, certain data derived from our unaudited Condensed Consolidated Statements of Income (Loss) (in thousands, except per share):

	Three Months Ended March 31,
	2021			2020
Revenue, net	$	60,503		$	30,654
Gross profit	25,470			13,448
Operating expenses	24,452			18,066
Operating income (loss)	1,018			(4,618)
Interest and other expense, net	526			2,199
Income (loss) before income taxes and equity in losses of unconsolidated affiliates	492			(6,817)
Income tax benefit	(1,565)			(1,508)
Net income (loss) before equity in losses of unconsolidated affiliates	2,057			(5,309)
Equity in losses of unconsolidated affiliates	(186)			(130)
Net income (loss) after equity in losses of unconsolidated affiliates	1,871			(5,439)
Net loss attributable to redeemable non-controlling interest	—			(151)
Net income (loss) attributable to Heska Corporation	$	1,871		$	(5,288)
Diluted earnings (loss) per share attributable to Heska Corporation	$	0.19		$	(0.70)
Non-GAAP net income (loss) per diluted share1 2	$	0.59		$	(0.14)
Adjusted EBITDA1	$	8,400		$	918
Net income (loss) margin1	3.4		%	(17.3)		%
Adjusted EBITDA margin1	13.9		%	3.0		%

1 See “Non-GAAP Financial Measures” for a reconciliation of Adjusted EBITDA to net income and Non-GAAP net income (loss) per diluted share to diluted earnings (loss) per share attributable to Heska Corporation, the closest comparable GAAP measures, for each of the periods presented. Net income (loss) margin and adjusted EBITDA margin are calculated as the ratio of net income (loss) and adjusted EBITDA, respectively, to revenue.

2 Shares used in the diluted per share calculation for non-GAAP net income per diluted share are (in thousands): 9,844 for the three months ended March 31, 2021 compared to 7,568 for the three months ended March 31, 2020.

Revenue

Total revenue increased 97.4% to $60.5 million for the three months ended March 31, 2021, compared to $30.7 million for the three months ended March 31, 2020. The significant increase in revenue is driven mainly by the acquisition of scil, which represented $22.3 million in the three months ended March 31, 2021 that was not included in the prior year period.

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Gross Profit

Gross profit increased 89.4% to $25.5 million in the three months ended March 31, 2021, compared to $13.4 million in the three months ended March 31, 2020. Gross margin decreased to 42.1% in the three months ended March 31, 2021, compared to 43.9% in the three months ended March 31, 2020. The increase in gross profit was due mainly to the scil acquisition. The decrease in gross margin percentage was due to lower margin in the scil business.

Operating Expenses

Selling and marketing expenses increased 47.8% to $10.9 million in the three months ended March 31, 2021, compared to $7.4 million in the three months ended March 31, 2020. The increase is a direct result of international expansion related to recent acquisitions and is in line with management expectations.

Research and development expenses decreased 44.3% to $1.2 million in the three months ended March 31, 2021, compared to $2.1 million in the three months ended March 31, 2020. The decrease is related to timing of spending on product development for the urine and fecal diagnostic analyzer and enhanced immunodiagnostic offerings in the current year. As we invest in future growth of the Company, management anticipates continued research and development costs throughout 2021, which is consistent with strategic initiatives.

General and administrative expenses increased 44.4% to $12.4 million in the three months ended March 31, 2021, compared to $8.6 million in the three months ended March 31, 2020. The increase is driven by $4.4 million related to additional expenses related to the impact of international acquisitions compared to the prior year, increased stock-based compensation expenses of $2.1 million, and increased other general and administrative costs. These increases are partially offset by $3.7 million in lower one-time costs that we incurred in the first quarter of 2020 related to the acquisition or scil that did not repeat in the first quarter of 2021.

Interest and Other Expense (Income), net

Interest and other expense, net, was $0.5 million in the three months ended March 31, 2021, compared to $2.2 million in the three months ended March 31, 2020. The decrease in interest and other expense was primarily driven by a change in accounting treatment related to non-cash interest expense as a result of the Notes. Refer to Note 16, Convertible Notes, in the Notes to Consolidated Financial Statements further information on the change in accounting treatment and its impact on interest expense.

Income Tax Benefit

For the three months ended March 31, 2021, we had a total income tax benefit of $1.6 million, including $2.2 million of domestic deferred income tax benefit and $0.6 million current income tax expense. In the three months ended March 31, 2020, we had a total income tax benefit of $1.5 million, including $1.5 million of domestic deferred income tax benefit and $25 thousand of current income tax expense. The increase in tax benefit is due to pretax income reported in the first quarter of 2021 compared to pretax loss reported in the first quarter of 2020 and the tax benefit received from the release of the valuation allowance based on a realizability assessment of deferred tax assets relating to expiring tax credit carry-forwards. The Company recognized $0.5 million in excess tax benefits related to employee share-based compensation in the three months ended March 31, 2021, compared to $0.3 million recognized in the three months ended March 31, 2020.

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Net Income (Loss) Attributable to Heska Corporation

Net income attributable to Heska was $1.9 million in the three months ended March 31, 2021, compared to net loss attributable to Heska of $5.3 million in the three months ended March 31, 2020. The difference between this line item and "Net income (loss) after equity in losses of unconsolidated affiliates" is the net income or loss attributable to our minority interest in our French subsidiary (Optomed), which we purchased in February 2019. In October 2020, the Company acquired the remaining 30% minority interest in Optomed. Net income is higher in the first quarter of 2021 due to increased revenue and profit, as discussed above, and the change in non-cash interest charges relating to the Notes.

Adjusted EBITDA

Adjusted EBITDA in the three months ended March 31, 2021 was $8.4 million (13.9% adjusted EBITDA margin), compared to $0.9 million (3.0% adjusted EBITDA margin) in the three months ended March 31, 2020. The increase is driven by increased revenue and gross profit, partially offset by increased operating expenses, as discussed above. Increased stock based compensation expenses and depreciation and amortization associated with the acquisition of scil are excluded from adjusted EBITDA. See “Non-GAAP Financial Measures” for a reconciliation of adjusted EBITDA to net income, the closest comparable GAAP measure, for each of the periods presented.

Earnings Per Share

Earnings per share attributable to Heska was $0.19 per diluted share in the three months ended March 31, 2021 compared to loss of $0.70 per diluted share in the three months ended March 31, 2020. The increase is primarily due to increases in revenue and profit and lower interest and amortization charges relating to the Notes, partially offset by increased operating expenses, as discussed above.

Non-GAAP Earnings Per Share

Non-GAAP EPS was income of $0.59 per diluted share in the three months ended March 31, 2021 compared to loss of $0.14 per diluted share in the three months ended March 31, 2020. The increase is primarily due to increased revenue and profit, partially offset by increased operating expenses. See “Non-GAAP Financial Measures" for a reconciliation of non-GAAP EPS to net income (loss) attributable to Heska per diluted share, the closest comparable U.S. GAAP measure, in each of the periods presented.

Non-GAAP Financial Measures

In addition to financial measures presented on the basis of accounting principles generally accepted in the U.S. (“U.S. GAAP”), we also present EBITDA, adjusted EBITDA, adjusted EBITDA margin, and non-GAAP net income (loss) per diluted share, which are non-GAAP measures.

These measures should be viewed as a supplement to, not substitute for, our results of operations presented under U.S. GAAP. The non-GAAP financial measures presented may not be comparable to similarly titled measures of other companies because they may not calculate their measures in the same manner. Management uses EBITDA, adjusted EBITDA, adjusted EBITDA margin and non-GAAP net income (loss) per diluted share as key profitability measures, which are included in monthly or quarterly analyses of our operating results to our senior management team, our annual budget and related goal setting and other performance measurements. We believe these non-GAAP measures enhance our investors' understanding of our business performance and that not adjusting for the items included in the reconciliations below would hinder comparison of the performance of our businesses on a period-over-period basis or with other businesses.

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The following tables reconcile our most directly comparable as-reported financial measures calculated in accordance with GAAP to our non-GAAP financial measures (in thousands, except percentages and per share amounts):

	Three Months Ended March 31,
	2021			2020
Net income (loss)1	$	2,057		$	(5,309)
Income tax benefit	(1,565)			(1,508)
Interest expense, net	531			2,113
Depreciation and amortization	3,571			1,374
EBITDA	$	4,594		$	(3,330)
Acquisition-related and other one-time costs2	155			3,874
Stock-based compensation	3,837			353
Equity in losses of unconsolidated affiliates	(186)			(130)
Net loss attributable to non-controlling interest	—			151
Adjusted EBITDA	$	8,400		$	918
Net income (loss) margin3	3.4		%	(17.3)		%
Adjusted EBITDA margin3	13.9		%	3.0		%

1 Net income (loss) used for reconciliation represents the "Net income (loss) before equity in losses of unconsolidated affiliates."

2 To exclude the effect of one-time charges of $0.2 million for the three months ending March 31, 2021, and $3.9 million for the three months ending March 31, 2020 incurred as part of acquisition and other related costs.

3 Net income (loss) margin and adjusted EBITDA margin are calculated as the ratio of net income (loss) and adjusted EBITDA, respectively, to revenue.

	Three Months Ended March 31,
	2021		2020
GAAP net income (loss) attributable to Heska per diluted share	$	0.19	$	(0.70)
Acquisition-related and other one-time costs1	0.02		0.51
Amortization of acquired intangibles2	0.14		0.02
Purchase accounting adjustments related to inventory and fixed asset step-up3	0.02		—
Amortization of debt discount and issuance costs	—		0.20
Stock-based compensation	0.39		0.05
Loss on equity investee transactions	0.02		0.02
Estimated income tax effect of above non-GAAP adjustments4	(0.19)		(0.24)
Non-GAAP net income (loss) per diluted share	$	0.59	$	(0.14)
Shares used in diluted per share calculations	9,844		7,568

1 To exclude the effect of one-time charges of $0.2 million for the three months ending March 31, 2021, and $3.9 million for the three months ending March 31, 2020 incurred as part of acquisition and other related costs.

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2 To exclude the effect of amortization of acquired intangibles of $1.4 million in the three months ended March 31, 2021, compared to $0.1 million in the three months ended March 31, 2020. These costs were incurred as part of the purchase accounting adjustments for the acquisitions of scil, Optomed and CVM.

3 To exclude the effect of purchase accounting adjustments for inventory and fixed asset step up amortization of $0.2 million for the three months ended March 31, 2021, which we did not have in the three months ended March 31, 2020.

4 Represents income tax expense utilizing an estimated effective tax rate that adjusts for non-GAAP measures including: acquisition-related and other one-time costs (excluding items which are not deductible for tax of $60 thousand cost for the three months ended March 31, 2021), amortization of acquired intangibles, purchase accounting adjustments, amortization of debt discount and issuance costs, and stock-based compensation. This incorporates the discrete tax benefits related to stock-based compensation of $0.5 million for the three months ended March 31, 2021 and to $0.3 million for the three months ended March 31, 2020. Adjusted effective tax rates are approximately 25% for both periods presented.

Impact of Inflation

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

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Analysis by Segment

The North America segment includes sales and costs from the United States, Canada and Mexico. The International segment includes sales and costs from Australia, France, Germany, Italy, Malaysia, Spain and Switzerland.

The North America segment represented approximately 61.6% of our revenue for the three months ended March 31, 2021 and the International segment represented approximately 38.4% of our revenue for the three months ended March 31, 2021.

The following sections and tables set forth, for the periods indicated, certain data derived from our unaudited Condensed Consolidated Statements of Income (Loss) (in thousands).

North America Segment

	Three Months Ended March 31,						Change
	2021			2020			Dollar Change		% Change
Point of Care laboratory:	$	19,939		$	16,302		$	3,637	22.3	%
Instruments & Other	2,988			2,616			372		14.2	%
Consumables	16,951			13,686			3,265		23.9	%
Point of Care imaging	6,688			3,496			3,192		91.3	%
PVD	6,864			4,504			2,360		52.4	%
OVP	3,781			3,348			433		12.9	%
Total North America revenue	$	37,272		$	27,650		$	9,622	34.8	%
North America Gross Profit	$	17,509		$	12,504		$	5,005	40.0	%
North America Gross Margin	47.0		%	45.2		%
North America Operating Income (Loss)	$	1,033		$	(4,093)		$	5,126	(125.2)	%
North America Operating Margin	2.8		%	(14.8)		%

North America segment revenue increased 34.8% to $37.3 million for the three months ended March 31, 2021, compared to $27.7 million for the three months ended March 31, 2020. The $9.6 million increase was driven by a 23.9% increase in POC Lab Consumables driven by utliziation and price increases, an increase of $3.2 million in Point of Care Imaging, which benefited from $3.0 million in sales from Canada not included in the comparative period as a result of the scil acquisition, and a $2.4 million increase in PVD related to an increase of $1.9 million for the contract manufactured heartworm preventive, Tri-Heart®, and increased allergy sales of $0.6 million.

Gross profit for the North America segment was $17.5 million compared to $12.5 million for the three months ended March 31, 2021 and 2020, respectively. The increase in gross profit is primarily driven by increased revenue mix in the current year period. Gross margin was 47.0% for the three months ended March 31, 2021, compared to 45.2% in the three months ended March 31, 2020. The increase is due to increased revenue and margins for consumables, which tend to be our highest margin products, and OVP, which experienced greater productivity in the period.

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North America operating income increased $5.1 million for the three months ended March 31, 2021 compared to the prior period. The increase is driven by increased revenue and profit as discussed above. Increases in operating expenses related to stock-based compensation of $3.2 million and expenses related to Canada of $1.0 million were offset by timing of research and development costs of $1.0 million and reduced one-time transaction related costs for the acquisition of scil in the prior year of $3.8 million.

International Segment

	Three Months Ended March 31,						Change
	2021			2020			Dollar  Change		%  Change
Point of Care laboratory:	$	15,239		$	795		$	14,444	1,816.9	%
Instruments & Other	3,014			235			2,779		1,182.6	%
Consumables	12,225			560			11,665		2,083.0	%
Point of Care imaging	6,658			1,358			5,300		390.3	%
PVD	1,334			851			483		56.8	%
Total International revenue	$	23,231		$	3,004		$	20,227	673.3	%
International Gross Profit	$	7,961		$	944		$	7,017	743.3	%
International Gross Margin	34.3		%	31.4		%
International Operating Loss	$	(15)		$	(525)		$	510	97.1	%
International Operating Margin	(0.1)		%	(17.5)		%

International segment revenue was $23.2 million compared to $3.0 million for the three months ended March 31, 2021 and 2020, respectively. The increase is due to the acquisition of scil, which contributed approximately $18.0 million of revenue in the three months ended March 31, 2021 that was not included in the comparable period.

Gross profit for the International segment was $8.0 million compared to $0.9 million for the three months ended March 31, 2021 and 2020, respectively. Gross margin for the International segment was 34.3% for the three months ended March 31, 2021 compared to 31.4% for the three months ended March 31, 2020. The increase in gross profit and gross margin is driven by increased revenue from acquisitions.

International operating loss decreased $0.5 million for the three months ended March 31, 2021 compared to the prior year period. The decrease in operating loss for the three months ended March 31, 2021 is driven by increased International revenue and gross profit from the scil acquisition.

Liquidity, Capital Resources and Financial Condition

We believe that adequate liquidity and cash generation is important to the execution of our strategic initiatives. Our ability to fund our operations, acquisitions, capital expenditures, and product development efforts may depend on our ability to access other forms of capital as well as our ability to generate cash from operating activities, which is subject to future operating performance, as well as general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control, including but not limited to effects of the COVID-19 pandemic. Our primary source of liquidity is our available cash of $238.5 million, which includes net proceeds from the issuance of common stock of approximately $165 million on March 5, 2021.

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

	Three Months Ended March 31,				Change
	2021		2020		Dollar Change		% Change
Net cash provided by (used in) operating activities	$	1,337	$	(4,761)	$	6,098	(128.1)	%
Net cash used in investing activities	(13,131)		(14,630)		1,499		(10.2)	%
Net cash provided by financing activities	164,355		121,630		42,725		35.1	%
Foreign exchange effect on cash and cash equivalents	(440)		(24)		(416)		1,733.3	%
Increase (decrease) in cash and cash equivalents	152,121		102,215		49,906		48.8	%
Cash and cash equivalents, beginning of the period	86,334		89,030		(2,696)		(3.0)	%
Cash and cash equivalents, end of the period	$	238,455	$	191,245	$	47,210	24.7	%

For the three months ended March 31, 2021 and March 31, 2020, cash flow provided by (used in) operations was $1.3 million and $4.8 million, respectively, which was primarily the result of (used for) (in thousands):

	Three Months Ended March 31,				Change
	2021		2020		Dollar Change		% Change
Net income (loss)	$	1,871	$	(5,439)	$	7,310	(134.4)	%
Non cash expenses and other adjustments	6,143		2,298		3,845		167.3	%
Change in accounts receivable	858		(1,092)		1,950		(178.6)	%
Change in inventories, net	(1,818)		(3,081)		1,263		(41.0)	%
Change in other assets	(893)		(429)		(464)		108.2	%
Change in accounts payable	153		837		(684)		(81.7)	%
Change in other liabilities	(4,977)		2,145		(7,122)		(332.0)	%
Net cash provided by (used in) operating activities	$	1,337	$	(4,761)	$	6,098	(128.1)	%

For the three months ended March 31, 2021 and March 31, 2020, cash flow used in investing activities was $13.1 million and $14.6 million, respectively, which was primarily used for (in thousands):

	Three Months Ended March 31,				Change
	2021		2020		Dollar Change		% Change
Acquisition of CVM	$	—	$	(14,420)	$	14,420	(100.0)	%
Acquisition of Lacuna, net of cash acquired	(3,882)		—		(3,882)		—	%
Promissory note receivable issuance	(9,000)		—		(9,000)		—	%
Purchases of property and equipment	(262)		(210)		(52)		24.8	%
Proceeds from disposition of property	13		—		13		—	%
Net cash provided by (used in) investing activities	$	(13,131)	$	(14,630)	$	1,499	(10.2)	%

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For the three months ended March 31, 2021 and March 31, 2020, cash flow from financing activities was $164.4 million and $121.6 million, respectively, which was the result of (in thousands):

	Three Months Ended March 31,				Change
	2021		2020		Dollar Change		% Change
Payment of stock issuance costs	$	(217)	$	(158)	$	(59)	37.3	%
Preferred stock proceeds	—		122,000		(122,000)		(100.0)	%
Proceeds from issuance of common stock	165,357		336		165,021		49,113.4	%
Repurchase of common stock	(679)		(538)		(141)		26.2	%
Repayments of other debt	(106)		(10)		(96)		960.0	%
Net cash provided by (used in) financing activities	$	164,355	$	121,630	$	42,725	35.1	%

We believe that our cash, cash equivalents and marketable securities balances, as well as the cash flows generated by our operations, will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures, including selling and marketing team expansion and product development initiatives, for at least the next 12 months. Our belief may prove to be incorrect, however, and we could utilize our available financial resources sooner than we currently expect. For example, we actively seek opportunities that are consistent with our strategic direction, which may require additional capital. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020. We may be required to seek additional equity or debt financing in order to meet these future capital requirements, even in the absence of any acquisitions. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, results of operations and financial condition would be adversely affected.

Effect of currency translation on cash

Net effect of foreign currency translations on cash was a $440 thousand negative impact for the three months ended March 31, 2021, compared to a $24 thousand negative impact for the three months ended March 31, 2020, an decrease of $416 thousand. These effects are related to changes in exchange rates between the U.S. Dollar and the Swiss Franc, Euro, Australian Dollar, Canadian Dollar, and Malaysian Ringgit, which are the functional currencies of our subsidiaries.

Off-Balance Sheet Arrangements and Contractual Obligations

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

Purchase Obligations

Purchase obligations represent contractual agreements to purchase goods or services that are legally binding; specify a fixed, minimum or range of quantities; specify a fixed, minimum, variable, or indexed price provision; and specify approximate timing of the transaction. As of March 31, 2021, the Company had purchase obligations for inventory of $50.1 million.

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Critical Accounting Policies and Estimates

Our accounting policies are described in our audited Consolidated Financial Statements and Notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020, other than the recently adopted accounting pronouncements described in Note 1. Operations and Summary of Significant Accounting Policies in our Condensed Consolidated Financial Statements included in Item 1 of this Form 10-Q, have not changed significantly since such filing.

Item 3.     Quantitative and Qualitative Disclosures about Market Risk

For quantitative and qualitative disclosures about other market risk affecting us, see the section under the heading “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the year ended December 31, 2020, which is incorporated by reference herein. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the market risks described in our Annual Report on Form 10-K for the year ended December 31, 2020.

Item 4.     Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures, as defined by Rule 13a-15(e) of the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of the end of such period to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures.

PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

We are involved in various legal proceedings that arise from time to time in the ordinary course of our business. We believe that the outcome of any of the proceedings should not have a material adverse effect on our financial position or long-term results of operations or cash flows.

Item 1A.Risk Factors

For a discussion of our risk factors, see Item 1A. Risk Factors in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020 (the "Annual Report").

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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information about our purchases of our outstanding Public Common Stock during the quarter ended March 31, 2021:

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under Plans or Programs
January 2021	2,368	$	158.44	—	$	—
February 2021	—	$	—	—	$	—
March 2021	1,313	$	171.68	—	$	—
	3,681	$	163.17	—	$	—
(1) Shares of Public Common Stock we purchased between January 1, 2021 and March 31, 2021 were solely for the cancellation of shares of stock withheld for related tax obligations.

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Item 6.    Exhibits

Exhibit Number	Notes	Description of Document
2.1#++	(1)	Agreement regarding the sale and purchase of the sole share in scil animal care company GmbH among Registrant, Heska GmbH, Covetrus Animal Health Holdings Limited and Covetrus, Inc. dated January 14, 2020.
2.2#	(2)	Amendment Agreement dated April 1, 2020 regarding the agreement on the sale and purchase of the sole share in scil animal care company GmbH.
3.1	(3)	Restated Certificate of Incorporation of the Registrant.
3.2	(3)	Certificate of Amendment to Restated Certificate of Incorporation of Registrant.
3.3	(3)	Certificate of Amendment to the Restated Certificate of Incorporation, as amended, of Registrant.
3.4	(4)	Certificate of Amendment to the Restated Certificate of Incorporation, as amended, of Registrant.
3.5	(5)	Certificate of Amendment to the Restated Certificate of Incorporation, as amended, of Registrant.
3.6	(6)	Certificate of Amendment to the Restated Certificate of Incorporation, as amended, of Registrant.
3.7	(7)	Certificate of Amendment to the Restated Certificate of Incorporation, as amended, of Registrant.
3.8	(8)	Certificate of Amendment to the Restated Certificate of Incorporation, as amended, of Registrant.
3.9	(9)	Certificate of Designation of Preferences, Rights and Limitations of Series X Convertible Preferred Stock.
3.10	(7)	Amended and Restated Bylaws of the Registrant, as amended.
10.1#++		Fourth Amendment to Clinical Chemistry Analyzer Agreement between Registrant and FUJIFILM Corporation, effective as of February 18, 2021.
10.2	(10)	Amended and Restated Management Incentive Plan Master Document.
31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1	*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
104.0		Cover Page Interactive Data File (embedded within the Inline XBRL document contained in Exhibit 101)

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Notes
*	Furnished and not filed herewith.
++	Certain confidential information contained in this exhibit has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
#	Certain personally identifiable information has been omitted from this exhibit pursuant to Item 601(a)(6) under Regulation S-K.
(1)	Filed with the Registrant's Form 10-K for the year ended December 31, 2019.
(2)	Filed with the Registrant's Form 8-K on April 1, 2020.
(3)	Filed with the Registrant's Form 10-K for the year ended December 31, 2012.
(4)	Filed with the Registrant's Form 10-K for the year ended December 31, 2016.
(5)	Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2017.
(6)	Filed with the Registrant's Form 8-K on May 9, 2018.
(7)	Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2019.
(8)	Filed with the Registrant’s Form 10-Q for the quarter ended March 31, 2020.
(9)	Filed with the Registrant’s Form 8-K on April 1, 2020.
(10)	Filed with the Registrant's Form 10-K for the year ended December 31, 2020.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on May 6, 2021.

HESKA CORPORATION

By: /s/ KEVIN S. WILSON  

Kevin S. Wilson

Chief Executive Officer and President

(Principal Executive Officer)

By: /s/ CATHERINE GRASSMAN

Catherine Grassman

Executive Vice President, Chief Financial Officer

(Principal Financial and Accounting Officer)

-44-

EX-10.1

Exhibit 10.1

Certain confidential information contained in this document, marked by brackets as [***], has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. In addition, certain personally identifiable information contained in this document, marked by brackets as [***], has been omitted from this exhibit pursuant to Item 601(a)(6) under Regulation S-K.

FOURTH AMENDMENT TO

CLINICAL CHEMISTRY ANALYZER AGREEMENT

This Fourth Amendment to Clinical Chemistry Analyzer Agreement (the “Amendment”), entered into as of February 18,2021 between Heska Corporation (“Heska”) and FUJIFILM Medical Systems U.S.A., Inc. (“FMSU”), modifies the Clinical Chemistry Analyzer Agreement dated January 30, 2007 (“CCAA”), including its amendments by the First Amendment to Clinical Chemistry Analyzer Agreement dated April 1st, 2014, the Second Amendment to Clinical Chemistry Analyzer Agreement dated April 1st, 2015, and the Third Amendment to Clinical Chemistry Analyzer Agreement dated August 27th, 2019. Capitalized terms not otherwise defined have the meanings ascribed to them in the Original Agreement. In the event of any conflict between the terms and conditions of the Original Agreement and this Amendment, the terms and conditions of this Amendment shall control. The headings in this Amendment are included for purposes of convenience only and shall not affect the construction or interpretation of its provisions.

WITNESSETH:

WHEREAS, FUJIFILM Corporation (“FF”) and Heska entered into the CCAA and its all amendments (collectively, “Original Agreement”) in which Heska was appointed an exclusive distributor of Products in the Territory subject to the tem1s and conditions of the Original Agreement, and FF assigned its rights and delegated its duties under the Original Agreement to FMSU;

WHEREAS, FMSU and Heska desire to amend the terms and conditions of the Original Agreement as set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and upon the terms and subject to the conditions set forth below, Heska and FMSU hereby agree as follows:

AGREEMENT:

1.Pursuant to Section 2.4 “Improved Products.”, Fuji Dri-Chem NX 600 Automated Clinical Chemistry Analyzer under Heska “Element DCX” brand is added to the Agreement as follows:

a.“Exhibit 1.13 Section 1. Analyzers:” is hereby deleted in its entirety and replaced with:

i.Analyzers:

1.List Price:

a.DriChem NX 500 (Element DC) Automated Clinical Chemist1y Analyzer: $[***]

b.DriChem NX 600 (Element DCX) Automated Clinical Chemist1y Analyzer: $[***]

c.DriChem NX 700 (ElementDCSX) Automated Clinical Chemistry Analyzer: $[***]

2.The chart of Consumables and Analyzers set forth in Exhibit 1.13 is hereby amended to add:

FUJI DRI-CHEM NX600 ANALYZER ELEMENT DCX $[***]

ii.No Other Changes. Except as expressly modified by this Amendment, all other provisions of the Original Agreement shall remain in full force and effect, as amended hereby.

IN WITNESS WHERE OF, the parties have executed this Amendment by their duly authorized representatives effective as of the last date on which this Amendment has been duly signed by both parties.

Signed:

Heska Corporation                    FUJIFILM Corporation

By: /s/ Kevin Wilson                    By: [***]

Name: Kevin Wilson                    Name: [***]

Title: CEO, President                     Title: [***]

Date: March 10, 2021                    Date: February 18, 2021

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Kevin S. Wilson, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Heska Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: May 6, 2021	/s/ Kevin S. Wilson
	KEVIN S. WILSON
	Chief Executive Officer and President
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Catherine Grassman, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Heska Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: May 6, 2021	/s/ Catherine Grassman
	CATHERINE GRASSMAN
	Executive Vice President, Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin S. Wilson, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Heska Corporation on Form 10-Q for the quarter ended March 31, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Heska Corporation, to the best of my knowledge.

Dated: May 6, 2021	By:	/s/ Kevin S. Wilson
	Name:	KEVIN S. WILSON
	Title:	Chief Executive Officer and President

I, Catherine Grassman, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Heska Corporation on Form 10-Q for the quarter ended March 31, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Heska Corporation, to the best of my knowledge.

Dated: May 6, 2021	By:	/s/ Catherine Grassman
	Name:	CATHERINE GRASSMAN
	Title:	Executive 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 by Heska Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

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Cover Page - shares	3 Months Ended
	Mar. 31, 2021	May 04, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2021
Document Transition Report	false
Entity File Number	000-22427
Entity Registrant Name	HESKA CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	77-0192527
Entity Address, Address Line One	3760 Rocky Mountain Avenue
Entity Address, City or Town	Loveland
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80538
City Area Code	970
Local Phone Number	493-7272
Title of 12(b) Security	Common stock, $0.01 par value
Trading Symbol	HSKA
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		10,424,924
Entity Central Index Key	0001038133
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2021

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 238,455	$ 86,334
Accounts receivable, net of allowance for losses of $760 and $769, respectively	29,891	31,080
Inventories	39,357	40,037
Net investment in leases, current, net of allowance for losses of $209 and $192, respectively	4,933	4,794
Prepaid expenses	4,485	3,875
Other current assets	5,641	5,155
Total current assets	322,762	171,275
Property and equipment, net	34,863	35,542
Operating lease right-of-use assets	5,089	5,457
Goodwill	89,968	88,276
Other intangible assets, net	53,879	55,992
Deferred tax asset, net	16,758	5,694
Net investment in leases, non-current	15,939	15,789
Investments in unconsolidated affiliates	6,518	6,704
Related party convertible note receivable, net	6,709	6,671
Other non-current assets	8,345	8,439
Total assets	569,573	399,839
Current liabilities:
Accounts payable	14,958	15,119
Accrued liabilities	14,920	18,055
Operating lease liabilities, current	2,015	2,087
Deferred revenue, current, and other	5,893	6,854
Total current liabilities	37,786	42,115
Convertible note, non-current, net	83,721	48,459
Deferred revenue, non-current	4,483	4,667
Other long-term borrowings	566	554
Operating lease liabilities, non-current	3,571	3,858
Deferred tax liability	11,432	11,856
Other liabilities	2,741	1,277
Total liabilities	144,300	112,786
Stockholders' equity:
Preferred stock, $.01 par value, 2,500,000 shares authorized, none issued or outstanding	0	0
Common stock, $.01 par value, 13,250,000 shares authorized, respectively, none issued or outstanding	0	0
Public common stock, $.01 par value, 13,250,000 shares authorized, 10,417,964 and 9,475,845 shares issued and outstanding, respectively	104	95
Additional paid-in capital	562,008	423,650
Accumulated other comprehensive income	8,786	14,169
Accumulated deficit	(145,625)	(150,861)
Total stockholders' equity	425,273	287,053
Total liabilities and stockholders' equity	$ 569,573	$ 399,839

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 760	$ 769
Leases, allowance for doubtful accounts	$ 209	$ 192
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	2,500,000	2,500,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	13,250,000	13,250,000
Common stock, shares issued (in shares)	0	0
Common stock, shares outstanding (in shares)	0	0

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenues [Abstract]
Revenue, net	$ 60,503	$ 30,654
Cost of revenue	35,033	17,206
Gross profit	25,470	13,448
Operating expenses:
Selling and marketing	10,907	7,380
Research and development	1,186	2,128
General and administrative	12,359	8,558
Total operating expenses	24,452	18,066
Operating income (loss)	1,018	(4,618)
Interest and other expense, net	526	2,199
Income (loss) before income taxes and equity in losses of unconsolidated affiliates	492	(6,817)
Income tax expense (benefit):
Current income tax expense	641	25
Deferred income tax benefit	(2,206)	(1,533)
Total income tax benefit	(1,565)	(1,508)
Net income (loss) before equity in losses of unconsolidated affiliates	2,057	(5,309)
Equity in losses of unconsolidated affiliates	(186)	(130)
Net income (loss) after equity in losses of unconsolidated affiliates	1,871	(5,439)
Net loss attributable to redeemable non-controlling interest	0	(151)
Net income (loss) attributable to Heska Corporation	$ 1,871	$ (5,288)
Earnings Per Share [Abstract]
Basic (loss) earnings per share attributable to Heska Corporation (in dollars per share)	$ 0.20	$ (0.70)
Diluted (loss) earnings per share attributable to Heska Corporation (in dollars per share)	$ 0.19	$ (0.70)
Weighted average outstanding shares used to compute basic (loss) earnings per share attributable to Heska Corporation (in shares)	9,478	7,568
Weighted average outstanding shares used to compute diluted (loss) earnings per share attributable to Heska Corporation (in shares)	9,844	7,568

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]
Net income (loss) after equity in losses from unconsolidated affiliates	$ 1,871	$ (5,439)
Other comprehensive loss:
Translation adjustments and losses from intra-entity transactions	(5,383)	(356)
Comprehensive loss	(3,512)	(5,795)
Comprehensive loss attributable to redeemable non-controlling interest	0	(151)
Comprehensive loss attributable to Heska Corporation	$ (3,512)	$ (5,644)

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Cumulative Effect, Period of Adoption, Adjusted Balance	Preferred Stock	Preferred Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Public Common Stock	Public Common Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Additional Paid-in Capital	Additional Paid-in Capital Cumulative Effect, Period of Adoption, Adjustment	Additional Paid-in Capital Cumulative Effect, Period of Adoption, Adjusted Balance	Accumulated Other Comprehensive Income	Accumulated Other Comprehensive Income Cumulative Effect, Period of Adoption, Adjusted Balance	Accumulated Deficit	Accumulated Deficit Cumulative Effect, Period of Adoption, Adjustment	Accumulated Deficit Cumulative Effect, Period of Adoption, Adjusted Balance
Beginning balance (in shares) at Dec. 31, 2019				0	0	7,882	7,882
Beginning balance at Dec. 31, 2019	$ 154,364	$ (18)	$ 154,346	$ 0	$ 0	$ 79	$ 79	$ 290,216		$ 290,216	$ 513	$ 513	$ (136,444)	$ (18)	$ (136,462)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss attributable to Heska Corporation	(5,288)												(5,288)
Issuance of common stock, net of shares withheld for employee taxes (in shares)						(39)
Issuance of common stock, net of shares withheld for employee taxes	(202)					$ (1)		(201)
Stock issued during period, shares, new issues (in shares)				122
Stock issued during period, value, new issues	121,785			$ 1				121,784
Stock-based compensation	353							353
Other comprehensive income (loss)	(356)										(356)
Ending balance (in shares) at Mar. 31, 2020				122		7,843
Ending balance at Mar. 31, 2020	270,638			$ 1		$ 78		412,152			157		(141,750)
Beginning balance (in shares) at Dec. 31, 2020				0	0	9,476	9,476
Beginning balance at Dec. 31, 2020	287,053	$ (26,469)	$ 260,584	$ 0	$ 0	$ 95	$ 95	423,650	$ (29,834)	$ 393,816	14,169	$ 14,169	(150,861)	$ 3,365	$ (147,496)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss attributable to Heska Corporation	1,871												1,871
Issuance of common stock, net of shares withheld for employee taxes (in shares)						1
Issuance of common stock, net of shares withheld for employee taxes	178					$ 0		178
Stock issued during period, shares, new issues (in shares)						941
Stock issued during period, value, new issues	164,186					$ 9		164,177
Stock-based compensation	3,837							3,837
Other comprehensive income (loss)	(5,383)										(5,383)
Ending balance (in shares) at Mar. 31, 2021				0		10,418
Ending balance at Mar. 31, 2021	$ 425,273			$ 0		$ 104		$ 562,008			$ 8,786		$ (145,625)

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash flows from operating activities:
Net income (loss) after equity in losses from unconsolidated affiliates	$ 1,871	$ (5,439)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization	3,571	1,374
Non-cash impact of operating leases	526	408
Deferred income tax benefit	(2,206)	(1,533)
Stock-based compensation	3,837	353
Equity in losses of unconsolidated affiliates	186	130
Accretion of discounts and issuance costs	22	1,524
Other losses	207	42
Changes in operating assets and liabilities (net of the effect of acquisitions):
Accounts receivable	858	(1,092)
Inventories	(1,818)	(3,081)
Other assets	(893)	(429)
Accounts payable	153	837
Other liabilities	(4,977)	2,145
Net cash provided by (used in) operating activities	1,337	(4,761)
Cash flows from investing activities:
Promissory note receivable issuance	(9,000)	0
Purchases of property and equipment	(262)	(210)
Proceeds from disposition of property and equipment	13	0
Net cash used in investing activities	(13,131)	(14,630)
Cash flows from financing activities:
Payment of stock issuance costs	(217)	(158)
Preferred stock proceeds	0	122,000
Proceeds from issuance of common stock	165,357	336
Repurchase of common stock	(679)	(538)
Repayments of other debt	(106)	(10)
Net cash provided by financing activities	164,355	121,630
Foreign exchange effect on cash and cash equivalents	(440)	(24)
Net increase (decrease) in cash and cash equivalents	152,121	102,215
Cash and cash equivalents, beginning of period	86,334	89,030
Cash and cash equivalents, end of period	238,455	191,245
Supplemental disclosure of cash flow information:
Non-cash transfers of equipment between inventory and property and equipment, net	1,549	553
Accrued stock issuance costs	97	56
Contingent consideration for acquisition	1,700	0
Indemnity holdback for acquisition	370	0
CVM
Cash flows from investing activities:
Payments to acquire businesses, net of cash acquired	0	(14,420)
Lacuna Diagnostics, Inc.
Cash flows from investing activities:
Payments to acquire businesses, net of cash acquired	$ (3,882)	$ 0

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OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Heska Corporation and its wholly-owned subsidiaries ("Heska", the "Company", "we" or "our") sell veterinary and animal health diagnostic and specialty products. Our offerings include Point of Care diagnostic laboratory instruments and supplies; digital imaging diagnostic products, software and services; digital cytology services; vaccines; local and cloud-based data services; allergy testing and immunotherapy; and single-use offerings such as in-clinic diagnostic tests and heartworm preventive products. Our core focus is on supporting veterinarians in the canine and feline healthcare space.

Basis of Presentation and Consolidation

The accompanying interim Condensed Consolidated Financial Statements are unaudited. The interim unaudited Condensed Consolidated Financial Statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include normal, recurring adjustments, necessary to present fairly the financial position of the Company as of March 31, 2021, and the results of our operations, statements of stockholders' equity, and cash flows for the three months ended March 31, 2021 and 2020.

The unaudited Condensed Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. Our unaudited Condensed Consolidated Financial Statements include our accounts and the accounts of our wholly-owned subsidiaries since their respective dates of acquisitions. All intercompany accounts and transactions have been eliminated in consolidation. Where our ownership of a subsidiary is less than 100%, the non-controlling interest is reported on our Condensed Consolidated Balance Sheets. The non-controlling interest in our consolidated net income is reported as "Net loss attributable to redeemable non-controlling interest" on our Condensed Consolidated Statements of Income (Loss). The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year or any future period, particularly in light of the COVID-19 pandemic and its effects on the domestic and global economies as described below. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and other financial information filed with the SEC.

Beginning in the first quarter of 2020, to limit the spread of COVID-19, governments took various actions including the issuance of stay-at-home policies and social distancing procedures and guidelines, causing some businesses to adjust, reduce or suspend business and operating activities. Veterinary care is widely recognized as an "essential" service for pet owners, and veterinarians continued to deliver essential medical care for sick and injured pets. The stay-at-home policies deployed early in 2020 to combat the spread of COVID-19 resulted in a decrease in companion animal clinical visits, including delay of elective procedures and wellness visits and as a result lowers demand for diagnostic testing services. Beginning in the second quarter of 2020, certain local, state and federal governments began to ease the stay-at-home policies and allowed more businesses and facilities to re-open, leading to a recovery in companion animal clinical visits and associated demand for our diagnostic products. During the fourth quarter of 2020 and into the first quarter of 2021, increased restrictions, mainly in the European Union, certain parts of Canada and Australia, in which we operate, re-emerged. The extent to which the continuation, or another wave outbreak of COVID-19, or an outbreak of other health epidemics could impact our business, results of operations and financial condition, including the potential for write-offs or impairments of assets and suspension of capital investments, will depend on future developments. We are unable to predict with certainty the effects of the COVID-19

pandemic on our customers, suppliers and vendors, as well as the actions of governments, and when and to what extent normal economic and operating conditions can resume; these effects may differ from those assumed in our projected estimates. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business, mainly in our ability to place new capital equipment, as a result of any economic impact that has occurred or may occur in the future.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are required when establishing the allowance for credit losses and the net realizable value of inventory; determining future costs associated with warranties provided; determining the period over which our obligations are fulfilled under agreements to license product rights and/or technology rights; evaluating long-lived and intangible assets and investments for estimated useful lives and impairment; estimating the useful lives and standalone selling prices of instruments under leasing arrangements; determining the allocation of purchase price under purchase accounting; estimating the expense associated with the granting of stock; determining the need for, and the amount of a valuation allowance on deferred tax assets; determining the fair value of our embedded derivatives; and determining the value of the non-controlling interest in a business combination. Our actual results may differ from these estimates and there may be changes to those estimates in future periods.

Critical Accounting Policies

Our accounting policies are described in our audited Consolidated Financial Statements and Notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020, and other than the recently adopted accounting pronouncements described below have not changed materially since such filing.

Adoption of New Accounting Pronouncements

Effective January 1, 2021, we adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740, and also clarifies and amends existing guidance to improve consistent application. We evaluated the impact of the standard on our consolidated financial statements and the adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

Effective January 1, 2021, we adopted ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this ASU clarify the interaction between the accounting for investments in equity securities, investments in equity method and certain derivatives instruments. The ASU is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. We evaluated the impact of the standard on our consolidated financial statements and the adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

Effective January 1, 2021, we early adopted ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40), which simplifies the accounting for certain convertible instruments. The update reduces the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible debt will be accounted for as a single liability measured at its amortized cost and convertible preferred stock will be accounted for as

a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. The update also requires the if-converted method to be used for convertible instruments and the effect of potential share settlement be included in the diluted earnings per share calculation when an instrument may be settled in cash or shares.

The Company's 3.75% Convertible Senior Notes due 2026 (the "Notes") are a convertible instrument with a cash-conversion feature that is accounted for within the scope of ASC 470-20 and impacted by the adoption of ASU 2020-06. The Company has elected to apply the modified retrospective method wherein the Company recognized a cumulative-effect adjustment to the opening balance of retained earnings (January 1, 2021). Further, the Company will not restate EPS in prior periods. The Company calculated the cumulative-effect adjustment as of January 1, 2021 by comparing (i) the historical amortization schedule for the Notes through December 31, 2020 and (ii) an updated amortization schedule wherein the conversion feature within the Notes would not be separated as an equity component and subsequently recognized as non-cash interest expense under ASC 835-30. As a result of ASU 2020-06, while cash interest expense is not impacted, non-cash interest accretion is limited to the amortization of debt issuance costs under ASC 835-30. Therefore, the Company prepared its transition journal entries by (i) reversing the conversion feature amount recorded in APIC and (ii) reversing the difference in non-cash interest expense via retained earnings. The adoption resulted in a decrease to accumulated deficit of $3.4 million, a decrease to additional paid-in capital of $29.8 million, and an increase to convertible note, non-current, net of $35.2 million. Additionally, due to the adoption, the Company reversed the remaining balance of the net deferred tax liability of $8.8 million, which was initially recorded in connection with the Notes.

Effective January 1, 2021, we adopted ASU 2020-10, Codification Improvements, which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC's regulations. We evaluated the impact of the standard on our consolidated financial statements and the adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

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REVENUE

3 Months Ended

Mar. 31, 2021

Revenue from Contract with Customer [Abstract]

REVENUE

REVENUE

We separate our goods and services among two reportable segments, North America and International. The two segments consist of revenue originating from:

•North America: including the United States, Canada and Mexico

•International: all geographies outside North America, currently consisting primarily of Australia, France, Germany, Italy, Malaysia, Spain and Switzerland

Refer to Note 18 for further detail regarding the change in reportable segments which required recast of prior period presentation.

The following table summarizes our segment revenue (in thousands):

	Three Months Ended March 31,
	2021		2020
North America Revenue:
POC Lab Instruments & Other	$	1,970	$	1,372
POC Sales-type leases	1,018		1,244
POC Lab Consumables	16,951		13,686
POC Imaging	6,688		3,496
PVD	6,864		4,504
OVP	3,781		3,348
Total North America Revenue	$	37,272	$	27,650
International Revenue:
POC Lab Instruments & Other	$	1,766	$	235
POC Sales-type leases	640		—
POC Operating Leases	608		—
POC Lab Consumables	12,225		560
POC Imaging	6,658		1,358
PVD	1,334		851
Total International Revenue	$	23,231	$	3,004
Total Revenue	$	60,503	$	30,654

Remaining Performance Obligations

Remaining performance obligations represent the aggregate transaction price allocated to performance obligations with an original contract term greater than one year which are fully or partially unsatisfied at the end of the period. Remaining performance obligations include noncancelable purchase orders, the non-lease portion of minimum purchase commitments under long-term supply arrangements, extended warranty, service and other long-term contracts. Remaining performance obligations do not include revenue from contracts with customers with an original term of one year or less, revenue from long-term supply arrangements with no minimum purchase requirements, revenue expected from purchases made in excess of the minimum purchase requirements, or revenue from instruments leased to customers. While the remaining performance obligation disclosure is similar in concept to backlog, the definition of remaining performance obligations excludes leases and contracts that provide the customer with the right to cancel or terminate for convenience with no substantial penalty, even if historical experience indicates the likelihood of cancellation or termination is remote. Additionally, the Company has elected to exclude contracts with customers with an original term of one year or less from remaining performance obligations.

As of March 31, 2021, the aggregate amount of the transaction price allocated to remaining minimum performance obligations was approximately $148.8 million. As of March 31, 2021, the Company expects to recognize revenue as follows (in thousands):

Year Ending December 31,	Revenue
2021 (remaining)	$	26,196
2022	32,891
2023	29,476
2024	24,369
2025	18,276
Thereafter	17,580
	$	148,788

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled contract assets, deferred revenue, and customer deposits and billings in excess of revenue recognized. In addition, the Company defers certain costs incurred to obtain contracts.

Contract Assets

Certain unbilled amounts related to long-term contracts for which we provide a free term to the customer are recorded in "Other current assets" and "Other non-current assets" on the accompanying Condensed Consolidated Balance Sheets. The collection of these balances occurs over the term of the underlying contract. The balances as of March 31, 2021 were $1.2 million and $4.1 million for current and non-current assets, respectively, shown net of related unearned interest. The balances as of December 31, 2020 were $1.2 million and $4.1 million for current and non-current assets, respectively, shown net of related unearned interest.

Contract Liabilities

The Company receives cash payments from customers for licensing fees or other arrangements that extend for a specified term. These contract liabilities are classified as either current or long-term in the Condensed Consolidated Balance Sheets based on the timing of when the Company expects to recognize revenue. As of March 31, 2021 and December 31, 2020, contract liabilities were $8.4 million and $8.9 million, respectively, and are included within "Deferred revenue, current, and other" and "Deferred revenue, non-current" in the accompanying Condensed Consolidated Balance Sheets. The decrease in the contract liability balance during the three-month period ended March 31, 2021 is approximately $1.7 million of revenue recognized during the period, offset by approximately $1.2 million of additional deferred sales in 2021. Contract liabilities are reported on the accompanying Condensed Consolidated Balance Sheets on a contract-by-contract basis.

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ACQUISITION AND RELATED PARTY ITEMS

3 Months Ended

Mar. 31, 2021

Business Combinations and Related Party Disclosure [Abstract]

ACQUISITION AND RELATED PARTY ITEMS

ACQUISITIONS AND RELATED PARTY ITEMS

Lacuna Acquisition

On February 1, 2021, the Company completed the acquisition of Lacuna Diagnostics, Inc. ("Lacuna"), a veterinary digital cytology company, to broaden the Company's point of care diagnostic offerings. The Company acquired 100% of the issued and outstanding shares of Lacuna for a purchase price of $4.3 million. The Company then dissolved Lacuna on February 1, 2021. In accordance with the purchase agreement, the Company is required to hold a $0.4 million general indemnity holdback that is intended to provide a non-exclusive source of funds for the payment of any losses identified and shall be released within 18 months of closing. As additional consideration for the shares, the Company agreed to a contingent earn-out of an additional $2.0 million based on the achievement of certain performance metrics within a twelve month period ("Initial Earn Out Period"), reducing to $1.0 million if such metrics were met in a twelve month period subsequent to the Initial Earn Out Period. The fair value of the contingent consideration as of the acquisition date was $1.7 million.

The total purchase consideration exceeded the fair value of the identifiable net assets acquired, resulting in $3.9 million of goodwill, primarily related to expanded opportunities with our offerings. All of the goodwill is allocated to the North America segment and is not tax deductible for income tax purposes.

The acquisition was accounted for as a business combination in accordance with ASC 805. As such, the total purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of February 1, 2021.

The information below represents the preliminary purchase price allocation as of the acquisition date (in thousands):

	February 1, 2021
Purchase price	$	4,255
Fair value of contingent consideration	1,700
Total purchase consideration	$	5,955
Cash and cash equivalents	3
Accounts receivable	170
Property and equipment, net	530
Other intangible assets, net	1,185
Deferred tax asset	167
Total assets acquired	2,055
Goodwill	3,900
Total fair value of consideration transferred	$	5,955

The Company's preliminary estimates of fair values of the net assets acquired are based on the information that was available at the date of the acquisition, and the Company is continuing to evaluate the underlying inputs and assumptions used in its valuations. Accordingly, these preliminary estimates are subject to change during the measurement period, which is up to one year from the date of the acquisition.

Intangible assets acquired, amortization method and estimated useful life as of February 1, 2021, was as follows (dollars in thousands):

	Useful Life	Amortization Method	Fair Value
Developed technology	3 years	Straight-line	$	1,000
Customer relationships	6 months	Straight-line	150
Trade name	11 months	Straight-line	35
Total intangible assets acquired			$	1,185

Pro forma financial information related to the acquisition of Lacuna has not been provided as it is not material to our consolidated results of operations.

scil Acquisition

On April 1, 2020, the Company completed the acquisition of scil animal care company GmbH (“scil”) from Covetrus, Inc. The Company purchased 100% of the capital stock of scil for an aggregate price of $110.3 million in cash. The acquisition represents a key milestone in the Company's long-term strategic plan, creating a global veterinary diagnostics company with leadership positions in key geographic markets. The purchase price exceeded the identifiable net assets, resulting in goodwill of $46.0 million, primarily attributable to the synergies expected from the expanded market opportunities with our offerings and the experienced workforce acquired. Of the goodwill acquired, $37.3 million is allocated to our International segment and $8.7 million is allocated to our North America segment. All of the goodwill is tax deductible for purposes of calculating Controlled Foreign Corporation ("CFC") tested income, which may result in a decrease to the Company's future U.S. federal tax liability.

The acquisition was accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. As such, the total purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of April 1, 2020. As of March 31, 2021, the Company has finalized the accounting for the acquisition.

The information below represents the final purchase price allocation of scil (in thousands):

	April 1, 2020
Total purchase consideration	$	110,290
Cash and cash equivalents	5,889
Accounts receivable	10,707
Inventories	11,278
Net investment in leases, current	311
Prepaid expenses	1,692
Other current assets	1,338
Property and equipment, net	19,320
Operating lease right-of-use assets	877
Other intangible assets, net	44,517
Net investment in leases, non-current	1,027
Investments in unconsolidated affiliates	55
Other non-current assets	291
Total assets acquired	97,302
Accounts payable	8,221
Accrued liabilities	7,067
Operating lease liabilities, current	356
Deferred revenue, current, and other	3,220
Deferred revenue, non-current	94
Operating lease liabilities, non-current	529
Deferred tax liability	13,249
Other liabilities	276
Net assets acquired	64,290
Goodwill	46,000
Total fair value of consideration transferred	$	110,290

Per the tax indemnification included in the purchase agreement of scil, the seller has indemnified the Company for $1.1 million related to uncertain tax positions taken in prior years. The outcome of this arrangement will either be settled or expire due to lapse of statute of limitations by 2027. As of March 31, 2021, approximately $0.7 million of the indemnification agreement remains outstanding.

Intangible assets acquired, amortization method and estimated useful life as of April 1, 2020, was as follows (dollars in thousands):

	Useful Life	Amortization Method	Fair Value
Customer relationships	10 years	Straight-line	$	36,272
Internally developed software	7 years	Straight-line	353
Backlog	0.2 years	Straight-line	210
Non-compete agreements	2 years	Straight-line	60
Trade name subject to amortization	0.8 years	Straight-line	66
Trademarks and trade names not subject to amortization	n/a	Indefinite	7,556
Total intangible assets acquired			$	44,517

Unaudited Pro Forma Financial Information

The following tables present unaudited supplemental pro forma financial information as if the acquisition had occurred on January 1, 2019 (in thousands):

	Three Months Ended March 31, 2020
Revenue, net	$	49,205
Net (loss) income before equity in losses of unconsolidated affiliates	$	(6,125)
Net (loss) income attributable to Heska Corporation	$	(6,104)

The pro forma financial information presented above has been prepared by combining our historical results and the historical results of scil and further reflects the effect of purchase accounting adjustments, including: (i) amortization of acquired intangible assets, (ii) the impact of certain fair value adjustments such as depreciation on the acquired property, plant and equipment, and (iii) historical intercompany sales between the Company and scil. The unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what actual results of operations would have been if the acquisition had occurred as the beginning of the period presented, nor are they indicative of future results of operations.

Other Related Party Activities

CVM Diagnostico Veternario S.L. and CVM Ecografia S.L. (“CVM”, collectively) conduct related party activities with Practice Clinicas Veterinarias Moviles, S.L. ("CVM Practice"), which is owned by CVM's management. CVM leases two warehouses from CVM Practice. CVM Practice charged CVM $8 thousand and $0 during the three months ended March 31, 2021 and 2020, respectively, all of which is related to lease payments. The right-of-use asset and lease liability amounts related to the warehouse leases were approximately $0.2 million as of both March 31, 2021 and December 31, 2020.

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INVESTMENTS IN UNCONSOLIDATED AFFILIATES

3 Months Ended

Mar. 31, 2021

Equity Method Investments and Joint Ventures [Abstract]

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The carrying values of investments in unconsolidated affiliates, categorized by type of investment, is as follows (in thousands):

	March 31, 2021		December 31, 2020
Equity method investment	$	3,500	$	3,686
Non-marketable equity security investment	3,018		3,018
Investment in Unconsolidated Affiliates	$	6,518	$	6,704

Equity Method Investment

On September 24, 2018, the Company invested approximately $5.1 million, including costs, to acquire an equity interest in a business as part of its product development strategy. As of March 31, 2021, the Company's ownership interest in the business was 29.1%. In connection with the investment, the Company entered into a Manufacturing Supply Agreement that grants the Company global exclusivity to specified products to be delivered under the agreement for a 15-year period that begins upon the Company's receipt and acceptance of an initial order under the agreement. The Company accounts for this investment using the equity method of accounting. Under the equity method, the carrying value of the investment is adjusted for the Company's proportionate share of the investee's reported earnings or losses with the corresponding share of earnings or losses reported as Equity in losses of unconsolidated affiliates, listed below Net income before equity in losses of unconsolidated affiliates within the Condensed Consolidated Statements of Income (Loss).

Non-Marketable Equity Security Investment

On August 8, 2018, the Company invested approximately $3.0 million, including costs, in exchange for preferred stock. The Company’s investment is a non-marketable equity security, recorded using the measurement alternative of cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes.

As part of the agreement, the Company entered into a Supply and License Agreement, which provides that the investee produce and commercialize products that will enhance the Company's diagnostic portfolio. As part of this agreement, the Company made an upfront payment of $1.0 million related to a worldwide exclusive license agreement over a 20-year period, recorded in both short and long-term other assets. In addition, the agreement provides for an additional contingent payment of $10.0 million, relating to the successful achievement of sales milestones. This potential future milestone payment has not yet been accrued as it is not deemed by the Company to be probable at this time.

Both parties in this arrangement are active participants and are exposed to significant risks and rewards dependent on the commercial success of the activities of the collaboration. The parties are actively working on developing and testing the product as well as funding the research and development. Heska classifies the amounts paid for research and development work within the North America segment research and development operating expenses. Expense is recognized ratably when incurred and in accordance with the development plan.

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INCOME TAXES

3 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company's total income tax expense (benefit) for our income (loss) before income taxes were as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Income (loss) before income taxes and equity in losses of unconsolidated affiliates	$	492	$	(6,817)
Total income tax benefit	$	(1,565)	$	(1,508)

There were cash payments for income taxes, net of refunds, of $496 thousand for the three months ended March 31, 2021 and there were cash payments of $7 thousand for income taxes for the three months ended March 31, 2020. The Company’s tax benefit was $1.6 million for the three months ended March 31, 2021 compared to the tax benefit of $1.5 million for the three months ended March 31, 2020. The increase in tax benefit in the three-month period is due to the tax benefit received from the partial release of the valuation allowance and excess tax benefits from employee stock compensation. The Company recognized $0.5 million in excess tax benefits related to employee share-based compensation for the three months ended March 31, 2021, compared to $0.3 million recognized for the three months ended March 31, 2020.

As of March 31, 2021, the Company had a deferred tax asset of approximately $9.4 million from net operating losses and tax credits and a net partial valuation allowance of approximately $4.4 million recorded against these deferred tax assets. In the first quarter, the Company released approximately $1.1 million of the partial valuation allowance against tax credits expiring in years after December 31, 2021. The release was due to future financial income forecasts showing the utilization of these credits.

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LEASES

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

LEASES, LESSEE

LEASES

Lessee Accounting

The Company leases buildings, office equipment, and vehicles. The following table summarizes the Company's operating and finance lease balances (in thousands):

Leases	Balance Sheet Location	March 31, 2021		December 31, 2020
Assets
Operating	Operating lease right-of-use assets	$	5,089	$	5,457
Finance	Property and equipment, net	1,745		1,907
Total Leased Assets		$	6,834	$	7,364
Liabilities
Operating	Operating lease liabilities, current	$	2,015	$	2,087
	Operating lease liabilities, non-current	3,571		3,858
Finance	Deferred revenue, current, and other	229		295
	Other liabilities	224		261
Total Lease Liabilities		$	6,039	$	6,501

Lessor Accounting

The following table summarizes the profit recognized on the commencement date for sales-type leases and lease income for equipment-only operating leases (in thousands):

	Three Months Ended
	March 31,
	2021		2020
Sales-type lease revenue	$	1,658	$	1,244
Sales-type lease cost of revenue	1,264		869
Profit recognized at commencement for sales-type leases	$	394	$	375
Operating lease income	$	608	$	—

LEASES, LESSOR

LEASES

Lessee Accounting

The Company leases buildings, office equipment, and vehicles. The following table summarizes the Company's operating and finance lease balances (in thousands):

Leases	Balance Sheet Location	March 31, 2021		December 31, 2020
Assets
Operating	Operating lease right-of-use assets	$	5,089	$	5,457
Finance	Property and equipment, net	1,745		1,907
Total Leased Assets		$	6,834	$	7,364
Liabilities
Operating	Operating lease liabilities, current	$	2,015	$	2,087
	Operating lease liabilities, non-current	3,571		3,858
Finance	Deferred revenue, current, and other	229		295
	Other liabilities	224		261
Total Lease Liabilities		$	6,039	$	6,501

Lessor Accounting

The following table summarizes the profit recognized on the commencement date for sales-type leases and lease income for equipment-only operating leases (in thousands):

	Three Months Ended
	March 31,
	2021		2020
Sales-type lease revenue	$	1,658	$	1,244
Sales-type lease cost of revenue	1,264		869
Profit recognized at commencement for sales-type leases	$	394	$	375
Operating lease income	$	608	$	—

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

The following is a reconciliation of the weighted-average shares outstanding used in the calculation of basic and diluted earnings per share ("EPS") for the three months ended March 31, 2021 and 2020 (in thousands, except per share data):

	Three Months Ended March 31,
	2021		2020
Net income (loss) attributable to Heska Corporation	$	1,871	$	(5,288)
Basic weighted-average common shares outstanding	9,478		7,568
Dilutive effect of stock options and restricted stock awards	366		—
Diluted weighted-average common shares outstanding	9,844		7,568
Basic earnings (loss) per share attributable to Heska Corporation	$	0.20	$	(0.70)
Diluted earnings (loss) per share attributable to Heska Corporation	$	0.19	$	(0.70)

The following potentially outstanding common shares from convertible preferred stock, convertible senior notes, stock options and restricted stock awards were excluded from the computation of diluted EPS because the effect would have been antidilutive (in thousands):

	Three Months Ended March 31,
	2021	2020
Convertible preferred stock	—	1,509
Convertible Senior Notes	996	43
Stock options and restricted stock	—	135
	996	1,687

As more fully described in Note 16, the Company's Notes are convertible under certain circumstances, as defined in the indenture, into a combination of cash and shares of the Company's common stock. As discussed in Note 1, the Company adopted ASU 2020-06, effective January 1, 2021, which amends certain guidance on the computation of EPS for convertible instruments. Prior to the adoption of ASU 2020-06, the Company used the treasury stock method when calculating the potential dilutive effect of the conversion feature of the Notes on earnings per share, if any. Under ASU 2020-06, the treasury stock method is no longer available, and entities must apply the if-converted method for convertible instruments and the effect of potential share settlement must be included in the diluted earnings per share calculation when an instrument may be settled in cash or shares. To determine the dilutive effect to earnings per share using the if-converted method, interest expense on the outstanding Notes is added back to the diluted earnings per share numerator and all of the potentially dilutive shares are included in the diluted earnings per share denominator. For the three months ended March 31, 2021, all of the potentially issuable shares with respect to the Notes were excluded from the calculation of diluted net earnings per share because the effect was anti-dilutive. The Company has elected to apply the modified retrospective method of adoption and will not restate EPS for the prior period.

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GOODWILL AND OTHER INTANGIBLES

3 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLES

GOODWILL AND OTHER INTANGIBLES

The following summarizes the change in goodwill during the three months ended March 31, 2021 (in thousands):

	North America		International		Total
Carrying amount, December 31, 2020	$	35,414	$	52,862	$	88,276
Goodwill attributable to acquisitions (subject to change)	3,900		—		3,900
Foreign currency adjustments	—		(2,208)		(2,208)
Carrying amount, March 31, 2021	$	39,314	$	50,654	$	89,968

Other intangibles consisted of the following (in thousands):

	March 31, 2021						December 31, 2020
	Gross Carrying Amount		Accum. Amortiz.		Net Carrying Amount		Gross Carrying Amount		Accum. Amortiz.		Net Carrying Amount
Intangible assets subject to amortization:
Customer relationships and other	$	45,636	$	(7,551)	$	38,085	$	46,989	$	(6,436)	$	40,553
Developed technology	9,647		(1,971)		7,676		8,669		(1,696)		6,973
Trade names	227		(118)		109		197		(105)		92
Intangible assets not subject to amortization:
Trade names	8,009		—		8,009		8,374		—		8,374
Total intangible assets	$	63,519	$	(9,640)	$	53,879	$	64,229	$	(8,237)	$	55,992

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

	Three Months Ended March 31,
	2021		2020
Amortization expense	$	1,404	$	428

The remaining weighted-average amortization period for intangible assets is approximately 8.3 years.

Estimated amortization expense related to intangibles for each of the five years from 2021 (remaining) through 2025 and thereafter is as follows (in thousands):

Year Ending December 31,
2021 (remaining)	$	4,683
2022	6,038
2023	5,677
2024	5,245
2025	5,190
Thereafter	19,037
Total amortization related to finite-lived intangible assets	$	45,870
Indefinite-lived intangible assets	8,009
Net intangible assets	$	53,879

No triggering events were identified in the first quarter of 2021 to require additional impairment testing.

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PROPERTY AND EQUIPMENT

3 Months Ended

Mar. 31, 2021

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Land	$	2,493	$	2,590
Building	12,310		12,737
Machinery and equipment	41,559		40,411
Office furniture and equipment	2,033		2,047
Computer hardware and software	4,885		4,773
Leasehold and building improvements	10,728		10,728
Construction in progress	49		4
Property and equipment, gross	74,057		73,290
Less accumulated depreciation	(39,194)		(37,748)
Total property and equipment, net	$	34,863	$	35,542

The Company has subscription agreements whereby its instruments in inventory may be placed at a customer's location on a rental basis. For instruments classified as operating leases, the cost of these instruments is transferred to machinery and equipment and depreciated, typically over a 5 to 7 year period depending on the circumstance under which the instrument is placed with the customer. Our cost of instruments under operating leases as of March 31, 2021 and December 31, 2020, was $14.4 million and $13.6 million, respectively, before accumulated depreciation of $5.0 million and $4.7 million, respectively.

Depreciation expense was $1.9 million and $0.9 million for the three months ended March 31, 2021 and 2020

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INVENTORIES, NET

3 Months Ended

Mar. 31, 2021

Inventory Disclosure [Abstract]

INVENTORIES, NET

INVENTORIES

Inventories consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Raw materials	$	13,028	$	14,454
Work in process	4,204		4,262
Finished goods	22,125		21,321
Total inventories	$	39,357	$	40,037

Inventories are measured on a first-in, first-out basis and stated at lower of cost or net realizable value.

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ACCRUED LIABILITIES

3 Months Ended

Mar. 31, 2021

Payables and Accruals [Abstract]

ACCRUED LIABILITIES

ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Accrued payroll and employee benefits	$	5,961	$	7,949
Accrued property taxes	547		659
Accrued purchase orders	1,126		1,549
Accrued taxes	3,882		3,731
Other	3,404		4,167
Total accrued liabilities	$	14,920	$	18,055

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

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CAPITAL STOCK

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

CAPITAL STOCK

CAPITAL STOCK

During the three months ended March 31, 2021, the Company granted the following stock options and restricted stock awards:

	Three Months Ended March 31, 2021
	Options/Awards Granted	Weighted-Average Grant Date Fair Value (per option/award)
Stock options	—	$	—
Restricted stock awards	235	$	154.48

The restricted stock awards granted during the three months ended March 31, 2021 contain only time-based vesting terms. The fair value was measured based on the number of shares granted and the closing market price of our common stock on the date of grant and will be expensed over the corresponding requisite service period.

2021 Equity Offering

On March 5, 2021, the Company completed a public offering of 940,860 shares of common stock, $0.01 par value per share, at a public offering price of $186.00 per share. The Company received net proceeds of approximately $164.2 million after deducting underwriting discounts and commissions and issuance costs. The Company granted the underwriters an option to purchase up to an additional 141,129 shares of common stock from the Company at the offering price of $186.00 per share (less the underwriting discounts and commissions), within 30 days of the Prospectus Supplement dated March 2, 2021. The Company evaluated the accounting treatment of the option under ASC 815-40, Derivatives and Hedging - Contracts on an Entity's Own Equity, and determined that it meets the criteria for equity treatment thereunder. The underwriters’ option was not exercised and expired on April 1, 2021. The Company anticipates using the net proceeds of the offering for general corporate purposes, including working capital, further development and potential commercialization of current and future product initiatives, collaborations, and capital expenditures. The Company may also use a portion of the net proceeds of this offering to fund possible investments in or acquisitions of complementary businesses, products or technologies, or to repay indebtedness.

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ACCUMULATED OTHER COMPREHENSIVE INCOME

3 Months Ended

Mar. 31, 2021

Equity [Abstract]

ACCUMULATED OTHER COMPREHENSIVE INCOME

ACCUMULATED OTHER COMPREHENSIVE INCOME

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

	Pension Adjustments		Foreign Currency Translation1		Foreign Currency Gain (Loss) on Intra-Entity Transactions2		Total Accumulated Other Comprehensive Income
Balances at December 31, 2020	$	(386)	$	5,872	$	8,683	$	14,169
Current period other comprehensive loss	—		(2,271)		(3,112)		(5,383)
Balances at March 31, 2021	$	(386)	$	3,601	$	5,571	$	8,786

1 Foreign currency gains and losses related to translation of foreign subsidiary financial statements.

2 The Company has intercompany loans of a long-term investment nature that are denominated in a foreign currency. These transactions are considered to be of a long-term nature if settlement is not planned or anticipated in the foreseeable future.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Warranties

The Company's current terms and conditions of sale include a limited warranty that its products and services will conform to published specifications at the time of shipment and a more extensive warranty related to certain products. The Company also sells a renewal warranty for certain of its products. The typical remedy for breach of warranty is to repair or replace any defective product, and if not possible or practical, the Company will accept the return of the defective product and refund the amount paid. Historically, the Company has incurred minimal warranty costs. The Company's warranty reserve was $0.5 million and $0.5 million as of March 31, 2021 and December 31, 2020, respectively.

Litigation

From time to time, the Company may be involved in litigation relating to claims arising out of its operations. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred, and the amount can be reasonably estimated.

On February 18, 2020, a former managing director of scil filed a claim disputing the effective date of the termination of his management service agreement and the validity of the Company´s waiver of his two-year post-contractual non-compete obligation. The Company intends to defend itself against the claim. Whether or not this will be successful depends on complex facts and circumstances. The Company is, based on the advice of its legal counsel, confident that it will be successful in evidencing the effective date of the termination of the management service agreement and as such, no accrual has been recorded for this ongoing litigation. Additionally, the Company is indemnified by the scil acquisition agreement for this claim.

As of March 31, 2021, the Company was not a party to any other legal proceedings that were expected, individually or in the aggregate, to have a material adverse effect on its business, financial condition, or operating results.

Off-Balance Sheet Commitments

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

Purchase ObligationsThe Company has contractual obligations with suppliers for unconditional annual minimum inventory purchases in the amounts of $50.1 million as of March 31, 2021.

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INTEREST AND OTHER EXPENSE, NET

3 Months Ended

Mar. 31, 2021

Other Income and Expenses [Abstract]

INTEREST AND OTHER EXPENSE, NET

INTEREST AND OTHER EXPENSE (INCOME), NET

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

	Three Months Ended March 31,
	2021		2020
Interest income	$	(389)	$	(233)
Interest expense	920		2,346
Other (income) expense, net	(5)		86
Total interest and other expense, net	$	526	$	2,199

Cash paid for interest for the three months ended March 31, 2021 and 2020 was $1.6 million and $1.6 million, respectively.

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CONVERTIBLE NOTES AND CREDIT FACILITY

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

CONVERTIBLE NOTES AND CREDIT FACILITY

CONVERTIBLE NOTES

Convertible Notes

On September 17, 2019, the Company issued $86.25 million aggregate principal amount of 3.750% Convertible Senior Notes due 2026 (the "Notes"), which included the exercise in full of an $11.25 million purchase option, to certain financial institutions as the initial purchasers of the Notes (the "Initial Purchasers"). The Company pays interest on the Notes semiannually in arrears at a rate of 3.750% per annum on March 15 and September 15 of each year. The Notes are senior unsecured obligations of the Company. The Notes were issued pursuant to an Indenture, dated September 17, 2019 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee. The net proceeds from the sale of the Notes were approximately $83.7 million after deducting the Initial Purchasers' discounts and the offering expenses payable by the Company.

Refer to Note 16, Convertible Notes, in the Notes to Consolidated Financial Statements included in Part II, Item 8 of the Company's 2020 Form 10-K for further information on the Notes.

No portion of the Notes was converted during the three months ended March 31, 2021 and the liability component was classified as long-term debt on the Company's Condensed Consolidated Balance Sheet as of March 31, 2021.

As discussed in Note 1, the Company early adopted ASU 2020-06, effective January 1, 2021, which simplifies the accounting for certain convertible instruments. Under the new standard, qualifying convertible debt is accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. As a result of ASU 2020-06, the Company's cash interest expense is not impacted, however, the Company's non-cash interest accretion is limited to the amortization of debt issuance costs under ASC 835-30. The new effective interest rate of the Notes post-adoption is 4.35%. The Company also reversed the conversion feature amount recorded in APIC and reversed the difference in non-cash interest expense via retained earnings.

The following table summarizes the net carrying amount of the Notes (in thousands):

	March 31, 2021		December 31, 2020
Principal amount of the Notes	$	86,250	$	86,250
Unamortized debt discount	(2,529)		(37,791)
Net carrying amount	$	83,721	$	48,459

Interest expense related to the Notes is comprised of the amortization of the debt discount and debt issuance costs and the contractual coupon interest as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Interest expense related to contractual coupon interest	$	809	$	809
Interest expense related to amortization of the debt discount	102		1,524
	$	911	$	2,333

As of March 31, 2021, the remaining period over which the unamortized discount will be amortized is 66.0 months.

The estimated fair value of the Notes was $180.4 million and $156.9 million as of March 31, 2021 and December 31, 2020, respectively, determined through consideration of quoted market prices in less active markets. The fair value measurement is classified as Level 2 in the fair value hierarchy, which is defined in ASC 820 as inputs other than quoted prices in active markets that are either directly or indirectly observable. Based on our closing stock price of $168.46 on March 31, 2021, the if-converted value exceeded the aggregate principal amount of the Notes by $81.5 million.

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NOTE RECEIVABLES

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

NOTE RECEIVABLES

NOTE RECEIVABLES

Convertible Promissory Note

On December 9, 2020, the Company's equity method investee (the “Investee”), issued a Convertible Promissory Note to the Company (the “Convertible Promissory Note”) with a principal amount of $6.65 million and a stated interest rate of 3.0% per annum that is payable monthly. The Convertible Promissory Note has a maturity date of December 9, 2023, or otherwise upon qualified redemption event or in the event of a default. Refer to Note 4 for additional information on our equity method investment.

The conversion of the Convertible Promissory Note is contingent upon certain events. Due to the convertible debt features included in the Convertible Promissory Note, it is not an equity security and is therefore not considered an additional investment in our equity method investee. The Company accounted for the transaction as a note receivable, included in Related party convertible note receivable, net on the Consolidated Balance Sheets. The note receivable will be measured at amortized cost and evaluated for credit losses each reporting period. The Company determined that the redemption features described above met the definition of an embedded derivative that requires bifurcation from the note receivable host. The Company measured the redemption features at fair value, with the residual proceeds paid allocated to the note receivable host, creating a discount to the note receivable. The discount will be amortized over the contractual term of the Convertible Promissory Note using the effective interest method. The effective interest rate of the Convertible Promissory Note is 8.69%, and the amortization of the discount will be included as interest income within Interest and other expense (income), net on the Consolidated Statements of Income.

The carrying value of the note receivable, included in Related party convertible note receivable, net on the Consolidated Balance Sheets, is as follows (in thousands):

	March 31, 2021		December 31, 2020
Principal amount	$	6,650	$	6,650
Unamortized discount	(903)		(977)
Net carrying amount	$	5,747	$	5,673

The fair value of the embedded derivative was $1.0 million as of March 31, 2021 and December 31, 2020, and is included in Related party convertible note receivable, net on the Consolidated Balance Sheets. The fair value of the derivative will be remeasured each reporting period, with the mark-to-market adjustment to be included in other expense (income) on the Consolidated Statements of Income. In addition, the Company recorded an allowance for expected credit losses on the promissory note of $33 thousand as of March 31, 2021.

Promissory Note

On February 1, 2021, one of the Company's equity investees (the "Investee"), which the Company accounts for as a nonmarketable equity security, issued a Promissory Note to the Company (the “Promissory Note”) with a principal amount of $9.0 million and a stated interest rate of 10.0% per annum that is payable monthly. The Promissory Note has a maturity date of December 1, 2024 and provides for interest only payments through December 1, 2023. Beginning on January 1, 2024, the Promissory Note requires repayment of the principal and interest over twelve consecutive monthly payments. As additional consideration, the Company

was also issued a warrant to acquire securities of the Investee that expires December 31, 2034. Refer to Note 4 for additional information on our equity investments.

The Company evaluated the accounting treatment of the warrant to acquire securities and determined is a freestanding instrument that meets the definition of an embedded derivative under ASC 815 and requires bifurcation from the note receivable host. The Company measured the warrant at fair value, with the residual proceeds paid allocated to the note receivable host, creating a discount to the note receivable. The discount will be amortized over the contractual term of the Promissory Note using the effective interest method. The effective interest rate of the Promissory Note is 10.99%, and the amortization of the discount will be included as interest income within Interest and other expense (income), net on the Consolidated Statements of Income.

The carrying value of the note receivable, included in Other non-current assets on the Consolidated Balance Sheets, is as follows (in thousands):

	March 31, 2021		December 31, 2020
Principal amount	$	9,000	$	—
Unamortized discount	(298)		—
Net carrying amount	$	8,702	$	—

The fair value of the embedded derivative was $0.3 million at issuance and as of March 31, 2021, and is included in Other non-current assets on our Consolidated Balance Sheets. The fair value of the derivative will be remeasured each reporting period, with the mark-to-market adjustment to be included in other expense (income) on the Consolidated Statements of Income. In addition, the Company recorded an allowance for expected credit losses on the note receivable of $0.3 million as of March 31, 2021.

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SEGMENT REPORTING

3 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

SEGMENT REPORTING

SEGMENT REPORTING

On April 1, 2020, Heska completed the acquisition of scil. Following this acquisition, the Company restructured its operating segments based on how the Chief Operating Decision Maker (“CODM”) manages the business, allocates resources, makes operating decisions and evaluates operating performance. The CODM changed how he assesses performance and allocates resources based on geographic regions in order to better align with the global operations of the Company. Based on this change, the Company determined it has two reportable segments and revised prior comparative periods to conform to the current period segment presentation. The Company’s two segments are North America and International.

The North America segment is comprised of the Company's operations in the United States, Canada and Mexico and the International segment is comprised of geographies outside of North America, which are the Company's operations primarily in Australia, France, Germany, Italy, Malaysia, Spain and Switzerland. Certain expenses incurred at the Company’s headquarters located in the North America segment are allocated to each segment in a manner consistent with where the benefits from the expenses are derived. However, there are certain corporate expenses included in the North America segment that the Company does not allocate. Such expenses include research and development, certain selling, marketing, general, and administrative costs that support the global organization. Sales and transfers between operating segments are accounted for at market-based transaction prices and are eliminated in consolidation. The Company's sales are determined by the country of origin where the sale occurred. For a description of Heska's previous operating segments, refer to Note 17 to the consolidated financial statements included in Part II. Item 8 of Heska's Annual Report on Form 10-K for the year ended December 31, 2019.

Our CODM continues to evaluate segment performance and allocate resources based on Revenue, Cost of Revenue, Gross Profit, Gross Margin and Operating Income. The CODM does not evaluate operating

segments using asset information; however, we have included total asset information by segment below as there was a material change in total assets by segment as of March 31, 2021 due to the acquisition of scil.

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

Three Months Ended March 31, 2021	North America			International			Total
Total revenue	$	37,272		$	23,231		$	60,503
Cost of revenue	19,763			15,270			35,033
Gross profit	17,509			7,961			25,470
Gross margin	47		%	34		%	42		%
Operating income (loss)	1,033			(15)			1,018

Three Months Ended March 31, 2020	North America			International			Total
Total revenue	$	27,650		$	3,004		$	30,654
Cost of revenue	15,146			2,060			17,206
Gross profit	12,504			944			13,448
Gross margin	45		%	31		%	44		%
Operating loss	(4,093)			(525)			(4,618)

Asset information by reportable segment as of March 31, 2021 is as follows (in thousands):

As of March 31, 2021	North America		International		Total
Total assets	$	413,913	$	155,660	$	569,573

Asset information by reportable segment as of December 31, 2020 is as follows (in thousands):

As of December 31, 2020	North America		International		Total
Total assets	$	238,550	$	161,289	$	399,839

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OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Basis of Presentation and Consolidation

The accompanying interim Condensed Consolidated Financial Statements are unaudited. The interim unaudited Condensed Consolidated Financial Statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include normal, recurring adjustments, necessary to present fairly the financial position of the Company as of March 31, 2021, and the results of our operations, statements of stockholders' equity, and cash flows for the three months ended March 31, 2021 and 2020.

The unaudited Condensed Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to such rules and regulations. Our unaudited Condensed Consolidated Financial Statements include our accounts and the accounts of our wholly-owned subsidiaries since their respective dates of acquisitions. All intercompany accounts and transactions have been eliminated in consolidation. Where our ownership of a subsidiary is less than 100%, the non-controlling interest is reported on our Condensed Consolidated Balance Sheets. The non-controlling interest in our consolidated net income is reported as "Net loss attributable to redeemable non-controlling interest" on our Condensed Consolidated Statements of Income (Loss). The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year or any future period, particularly in light of the COVID-19 pandemic and its effects on the domestic and global economies as described below. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and other financial information filed with the SEC.

Beginning in the first quarter of 2020, to limit the spread of COVID-19, governments took various actions including the issuance of stay-at-home policies and social distancing procedures and guidelines, causing some businesses to adjust, reduce or suspend business and operating activities. Veterinary care is widely recognized as an "essential" service for pet owners, and veterinarians continued to deliver essential medical care for sick and injured pets. The stay-at-home policies deployed early in 2020 to combat the spread of COVID-19 resulted in a decrease in companion animal clinical visits, including delay of elective procedures and wellness visits and as a result lowers demand for diagnostic testing services. Beginning in the second quarter of 2020, certain local, state and federal governments began to ease the stay-at-home policies and allowed more businesses and facilities to re-open, leading to a recovery in companion animal clinical visits and associated demand for our diagnostic products. During the fourth quarter of 2020 and into the first quarter of 2021, increased restrictions, mainly in the European Union, certain parts of Canada and Australia, in which we operate, re-emerged. The extent to which the continuation, or another wave outbreak of COVID-19, or an outbreak of other health epidemics could impact our business, results of operations and financial condition, including the potential for write-offs or impairments of assets and suspension of capital investments, will depend on future developments. We are unable to predict with certainty the effects of the COVID-19

pandemic on our customers, suppliers and vendors, as well as the actions of governments, and when and to what extent normal economic and operating conditions can resume; these effects may differ from those assumed in our projected estimates. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business, mainly in our ability to place new capital equipment, as a result of any economic impact that has occurred or may occur in the future.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are required when establishing the allowance for credit losses and the net realizable value of inventory; determining future costs associated with warranties provided; determining the period over which our obligations are fulfilled under agreements to license product rights and/or technology rights; evaluating long-lived and intangible assets and investments for estimated useful lives and impairment; estimating the useful lives and standalone selling prices of instruments under leasing arrangements; determining the allocation of purchase price under purchase accounting; estimating the expense associated with the granting of stock; determining the need for, and the amount of a valuation allowance on deferred tax assets; determining the fair value of our embedded derivatives; and determining the value of the non-controlling interest in a business combination.

Recent Accounting Pronouncements

Adoption of New Accounting Pronouncements

Effective January 1, 2021, we adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740, and also clarifies and amends existing guidance to improve consistent application. We evaluated the impact of the standard on our consolidated financial statements and the adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

Effective January 1, 2021, we adopted ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this ASU clarify the interaction between the accounting for investments in equity securities, investments in equity method and certain derivatives instruments. The ASU is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. We evaluated the impact of the standard on our consolidated financial statements and the adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

Effective January 1, 2021, we early adopted ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40), which simplifies the accounting for certain convertible instruments. The update reduces the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible debt will be accounted for as a single liability measured at its amortized cost and convertible preferred stock will be accounted for as

a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. The update also requires the if-converted method to be used for convertible instruments and the effect of potential share settlement be included in the diluted earnings per share calculation when an instrument may be settled in cash or shares.

The Company's 3.75% Convertible Senior Notes due 2026 (the "Notes") are a convertible instrument with a cash-conversion feature that is accounted for within the scope of ASC 470-20 and impacted by the adoption of ASU 2020-06. The Company has elected to apply the modified retrospective method wherein the Company recognized a cumulative-effect adjustment to the opening balance of retained earnings (January 1, 2021). Further, the Company will not restate EPS in prior periods. The Company calculated the cumulative-effect adjustment as of January 1, 2021 by comparing (i) the historical amortization schedule for the Notes through December 31, 2020 and (ii) an updated amortization schedule wherein the conversion feature within the Notes would not be separated as an equity component and subsequently recognized as non-cash interest expense under ASC 835-30. As a result of ASU 2020-06, while cash interest expense is not impacted, non-cash interest accretion is limited to the amortization of debt issuance costs under ASC 835-30. Therefore, the Company prepared its transition journal entries by (i) reversing the conversion feature amount recorded in APIC and (ii) reversing the difference in non-cash interest expense via retained earnings. The adoption resulted in a decrease to accumulated deficit of $3.4 million, a decrease to additional paid-in capital of $29.8 million, and an increase to convertible note, non-current, net of $35.2 million. Additionally, due to the adoption, the Company reversed the remaining balance of the net deferred tax liability of $8.8 million, which was initially recorded in connection with the Notes.

Effective January 1, 2021, we adopted ASU 2020-10, Codification Improvements, which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC's regulations. We evaluated the impact of the standard on our consolidated financial statements and the adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

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REVENUE (Tables)

3 Months Ended

Mar. 31, 2021

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following table summarizes our segment revenue (in thousands):

	Three Months Ended March 31,
	2021		2020
North America Revenue:
POC Lab Instruments & Other	$	1,970	$	1,372
POC Sales-type leases	1,018		1,244
POC Lab Consumables	16,951		13,686
POC Imaging	6,688		3,496
PVD	6,864		4,504
OVP	3,781		3,348
Total North America Revenue	$	37,272	$	27,650
International Revenue:
POC Lab Instruments & Other	$	1,766	$	235
POC Sales-type leases	640		—
POC Operating Leases	608		—
POC Lab Consumables	12,225		560
POC Imaging	6,658		1,358
PVD	1,334		851
Total International Revenue	$	23,231	$	3,004
Total Revenue	$	60,503	$	30,654

Schedule of Timing of Revenue Expected to be Recognized

As of March 31, 2021, the Company expects to recognize revenue as follows (in thousands):

Year Ending December 31,	Revenue
2021 (remaining)	$	26,196
2022	32,891
2023	29,476
2024	24,369
2025	18,276
Thereafter	17,580
	$	148,788

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ACQUISITION AND RELATED PARTY ITEMS ACQUISITION AND RELATED PARTY ITEMS (Tables)

3 Months Ended

Mar. 31, 2021

Business Combinations and Related Party Disclosure [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The information below represents the preliminary purchase price allocation as of the acquisition date (in thousands):

	February 1, 2021
Purchase price	$	4,255
Fair value of contingent consideration	1,700
Total purchase consideration	$	5,955
Cash and cash equivalents	3
Accounts receivable	170
Property and equipment, net	530
Other intangible assets, net	1,185
Deferred tax asset	167
Total assets acquired	2,055
Goodwill	3,900
Total fair value of consideration transferred	$	5,955

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination

Intangible assets acquired, amortization method and estimated useful life as of February 1, 2021, was as follows (dollars in thousands):

	Useful Life	Amortization Method	Fair Value
Developed technology	3 years	Straight-line	$	1,000
Customer relationships	6 months	Straight-line	150
Trade name	11 months	Straight-line	35
Total intangible assets acquired			$	1,185

Intangible assets acquired, amortization method and estimated useful life as of April 1, 2020, was as follows (dollars in thousands):

	Useful Life	Amortization Method	Fair Value
Customer relationships	10 years	Straight-line	$	36,272
Internally developed software	7 years	Straight-line	353
Backlog	0.2 years	Straight-line	210
Non-compete agreements	2 years	Straight-line	60
Trade name subject to amortization	0.8 years	Straight-line	66
Trademarks and trade names not subject to amortization	n/a	Indefinite	7,556
Total intangible assets acquired			$	44,517

Schedule of Business Acquisitions, by Acquisition

The information below represents the final purchase price allocation of scil (in thousands):

	April 1, 2020
Total purchase consideration	$	110,290
Cash and cash equivalents	5,889
Accounts receivable	10,707
Inventories	11,278
Net investment in leases, current	311
Prepaid expenses	1,692
Other current assets	1,338
Property and equipment, net	19,320
Operating lease right-of-use assets	877
Other intangible assets, net	44,517
Net investment in leases, non-current	1,027
Investments in unconsolidated affiliates	55
Other non-current assets	291
Total assets acquired	97,302
Accounts payable	8,221
Accrued liabilities	7,067
Operating lease liabilities, current	356
Deferred revenue, current, and other	3,220
Deferred revenue, non-current	94
Operating lease liabilities, non-current	529
Deferred tax liability	13,249
Other liabilities	276
Net assets acquired	64,290
Goodwill	46,000
Total fair value of consideration transferred	$	110,290

Business Acquisition, Pro Forma Information

The following tables present unaudited supplemental pro forma financial information as if the acquisition had occurred on January 1, 2019 (in thousands):

	Three Months Ended March 31, 2020
Revenue, net	$	49,205
Net (loss) income before equity in losses of unconsolidated affiliates	$	(6,125)
Net (loss) income attributable to Heska Corporation	$	(6,104)

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INVESTMENTS IN UNCONSOLIDATED AFFILIATES (Tables)

3 Months Ended

Mar. 31, 2021

Equity Method Investments and Joint Ventures [Abstract]

Carrying values of investments in unconsolidated entities

The carrying values of investments in unconsolidated affiliates, categorized by type of investment, is as follows (in thousands):

	March 31, 2021		December 31, 2020
Equity method investment	$	3,500	$	3,686
Non-marketable equity security investment	3,018		3,018
Investment in Unconsolidated Affiliates	$	6,518	$	6,704

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INCOME TAXES (Tables)

3 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Schedule of components of income tax expense

The Company's total income tax expense (benefit) for our income (loss) before income taxes were as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Income (loss) before income taxes and equity in losses of unconsolidated affiliates	$	492	$	(6,817)
Total income tax benefit	$	(1,565)	$	(1,508)

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LEASES (Tables)

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Assets and Liabilities, Lessee

The following table summarizes the Company's operating and finance lease balances (in thousands):

Leases	Balance Sheet Location	March 31, 2021		December 31, 2020
Assets
Operating	Operating lease right-of-use assets	$	5,089	$	5,457
Finance	Property and equipment, net	1,745		1,907
Total Leased Assets		$	6,834	$	7,364
Liabilities
Operating	Operating lease liabilities, current	$	2,015	$	2,087
	Operating lease liabilities, non-current	3,571		3,858
Finance	Deferred revenue, current, and other	229		295
	Other liabilities	224		261
Total Lease Liabilities		$	6,039	$	6,501

Sales-type Lease, Lease Income

The following table summarizes the profit recognized on the commencement date for sales-type leases and lease income for equipment-only operating leases (in thousands):

	Three Months Ended
	March 31,
	2021		2020
Sales-type lease revenue	$	1,658	$	1,244
Sales-type lease cost of revenue	1,264		869
Profit recognized at commencement for sales-type leases	$	394	$	375
Operating lease income	$	608	$	—

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EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Reconciliation of basic and diluted earnings per share

The following is a reconciliation of the weighted-average shares outstanding used in the calculation of basic and diluted earnings per share ("EPS") for the three months ended March 31, 2021 and 2020 (in thousands, except per share data):

	Three Months Ended March 31,
	2021		2020
Net income (loss) attributable to Heska Corporation	$	1,871	$	(5,288)
Basic weighted-average common shares outstanding	9,478		7,568
Dilutive effect of stock options and restricted stock awards	366		—
Diluted weighted-average common shares outstanding	9,844		7,568
Basic earnings (loss) per share attributable to Heska Corporation	$	0.20	$	(0.70)
Diluted earnings (loss) per share attributable to Heska Corporation	$	0.19	$	(0.70)

Schedule of antidilutive securities excluded from computation of earnings per share

The following potentially outstanding common shares from convertible preferred stock, convertible senior notes, stock options and restricted stock awards were excluded from the computation of diluted EPS because the effect would have been antidilutive (in thousands):

	Three Months Ended March 31,
	2021	2020
Convertible preferred stock	—	1,509
Convertible Senior Notes	996	43
Stock options and restricted stock	—	135
	996	1,687

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GOODWILL AND OTHER INTANGIBLES (Tables)

3 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of changes in goodwill

The following summarizes the change in goodwill during the three months ended March 31, 2021 (in thousands):

	North America		International		Total
Carrying amount, December 31, 2020	$	35,414	$	52,862	$	88,276
Goodwill attributable to acquisitions (subject to change)	3,900		—		3,900
Foreign currency adjustments	—		(2,208)		(2,208)
Carrying amount, March 31, 2021	$	39,314	$	50,654	$	89,968

Schedule of other intangible assets

Other intangibles consisted of the following (in thousands):

	March 31, 2021						December 31, 2020
	Gross Carrying Amount		Accum. Amortiz.		Net Carrying Amount		Gross Carrying Amount		Accum. Amortiz.		Net Carrying Amount
Intangible assets subject to amortization:
Customer relationships and other	$	45,636	$	(7,551)	$	38,085	$	46,989	$	(6,436)	$	40,553
Developed technology	9,647		(1,971)		7,676		8,669		(1,696)		6,973
Trade names	227		(118)		109		197		(105)		92
Intangible assets not subject to amortization:
Trade names	8,009		—		8,009		8,374		—		8,374
Total intangible assets	$	63,519	$	(9,640)	$	53,879	$	64,229	$	(8,237)	$	55,992

Schedule of amortization expense on intangible assets

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

	Three Months Ended March 31,
	2021		2020
Amortization expense	$	1,404	$	428

Schedule of estimated future amortization expense

Estimated amortization expense related to intangibles for each of the five years from 2021 (remaining) through 2025 and thereafter is as follows (in thousands):

Year Ending December 31,
2021 (remaining)	$	4,683
2022	6,038
2023	5,677
2024	5,245
2025	5,190
Thereafter	19,037
Total amortization related to finite-lived intangible assets	$	45,870
Indefinite-lived intangible assets	8,009
Net intangible assets	$	53,879

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PROPERTY AND EQUIPMENT (Tables)

3 Months Ended

Mar. 31, 2021

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

Property and equipment, net, consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Land	$	2,493	$	2,590
Building	12,310		12,737
Machinery and equipment	41,559		40,411
Office furniture and equipment	2,033		2,047
Computer hardware and software	4,885		4,773
Leasehold and building improvements	10,728		10,728
Construction in progress	49		4
Property and equipment, gross	74,057		73,290
Less accumulated depreciation	(39,194)		(37,748)
Total property and equipment, net	$	34,863	$	35,542

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INVENTORIES, NET (Tables)

3 Months Ended

Mar. 31, 2021

Inventory Disclosure [Abstract]

Schedule of inventory

Inventories consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Raw materials	$	13,028	$	14,454
Work in process	4,204		4,262
Finished goods	22,125		21,321
Total inventories	$	39,357	$	40,037

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ACCRUED LIABILITIES (Tables)

3 Months Ended

Mar. 31, 2021

Payables and Accruals [Abstract]

Schedule of accrued liabilities

Accrued liabilities consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Accrued payroll and employee benefits	$	5,961	$	7,949
Accrued property taxes	547		659
Accrued purchase orders	1,126		1,549
Accrued taxes	3,882		3,731
Other	3,404		4,167
Total accrued liabilities	$	14,920	$	18,055

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CAPITAL STOCK (Tables)

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

Schedule of stock options plans

During the three months ended March 31, 2021, the Company granted the following stock options and restricted stock awards:

	Three Months Ended March 31, 2021
	Options/Awards Granted	Weighted-Average Grant Date Fair Value (per option/award)
Stock options	—	$	—
Restricted stock awards	235	$	154.48

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ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables)

3 Months Ended

Mar. 31, 2021

Equity [Abstract]

Schedule of accumulated other comprehensive income (loss)

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

	Pension Adjustments		Foreign Currency Translation1		Foreign Currency Gain (Loss) on Intra-Entity Transactions2		Total Accumulated Other Comprehensive Income
Balances at December 31, 2020	$	(386)	$	5,872	$	8,683	$	14,169
Current period other comprehensive loss	—		(2,271)		(3,112)		(5,383)
Balances at March 31, 2021	$	(386)	$	3,601	$	5,571	$	8,786

1 Foreign currency gains and losses related to translation of foreign subsidiary financial statements.

2 The Company has intercompany loans of a long-term investment nature that are denominated in a foreign currency. These transactions are considered to be of a long-term nature if settlement is not planned or anticipated in the foreseeable future.

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INTEREST AND OTHER EXPENSE, NET (Tables)

3 Months Ended

Mar. 31, 2021

Other Income and Expenses [Abstract]

Schedule of interest expense (income) and other income, net

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

	Three Months Ended March 31,
	2021		2020
Interest income	$	(389)	$	(233)
Interest expense	920		2,346
Other (income) expense, net	(5)		86
Total interest and other expense, net	$	526	$	2,199

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CONVERTIBLE NOTES AND CREDIT FACILITY (Tables)

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Convertible Debt

	March 31, 2021		December 31, 2020
Principal amount of the Notes	$	86,250	$	86,250
Unamortized debt discount	(2,529)		(37,791)
Net carrying amount	$	83,721	$	48,459

Interest Income and Interest Expense Disclosure

Interest expense related to the Notes is comprised of the amortization of the debt discount and debt issuance costs and the contractual coupon interest as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Interest expense related to contractual coupon interest	$	809	$	809
Interest expense related to amortization of the debt discount	102		1,524
	$	911	$	2,333

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NOTE RECEIVABLES (Tables)

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Schedule of Related Party Transactions

The carrying value of the note receivable, included in Related party convertible note receivable, net on the Consolidated Balance Sheets, is as follows (in thousands):

	March 31, 2021		December 31, 2020
Principal amount	$	6,650	$	6,650
Unamortized discount	(903)		(977)
Net carrying amount	$	5,747	$	5,673

The carrying value of the note receivable, included in Other non-current assets on the Consolidated Balance Sheets, is as follows (in thousands):

	March 31, 2021		December 31, 2020
Principal amount	$	9,000	$	—
Unamortized discount	(298)		—
Net carrying amount	$	8,702	$	—

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SEGMENT REPORTING (Tables)

3 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Reconciliation of Revenue from Segments to Consolidated

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

Three Months Ended March 31, 2021	North America			International			Total
Total revenue	$	37,272		$	23,231		$	60,503
Cost of revenue	19,763			15,270			35,033
Gross profit	17,509			7,961			25,470
Gross margin	47		%	34		%	42		%
Operating income (loss)	1,033			(15)			1,018

Three Months Ended March 31, 2020	North America			International			Total
Total revenue	$	27,650		$	3,004		$	30,654
Cost of revenue	15,146			2,060			17,206
Gross profit	12,504			944			13,448
Gross margin	45		%	31		%	44		%
Operating loss	(4,093)			(525)			(4,618)

Schedule of revenue from external customers and long-lived assets, by geographical areas

Asset information by reportable segment as of March 31, 2021 is as follows (in thousands):

As of March 31, 2021	North America		International		Total
Total assets	$	413,913	$	155,660	$	569,573

Asset information by reportable segment as of December 31, 2020 is as follows (in thousands):

As of December 31, 2020	North America		International		Total
Total assets	$	238,550	$	161,289	$	399,839

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REVENUE (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($) segment	Mar. 31, 2020 USD ($)	Dec. 31, 2020 USD ($)
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Number of reportable segments | segment	2
Revenue, net	$ 60,503	$ 30,654
Contract receivables, current	1,200		$ 1,200
Contract receivables, noncurrent	4,100		4,100
Current portion of deferred revenue, and other	8,400		$ 8,900
Contract liabilities, revenue recognized	1,700
Contract liabilities, increase due to additional deferred sales	1,200
North America | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	37,272	27,650
International | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	23,231	3,004
POC Lab Instruments & Other | North America | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	1,970	1,372
POC Lab Instruments & Other | International | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	1,766	235
POC Sales-type leases | North America | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	1,018	1,244
POC Sales-type leases | International | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	640	0
POC Lab Consumables | North America | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	16,951	13,686
POC Lab Consumables | International | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	12,225	560
POC Operating Leases | International | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	608	0
POC Imaging | North America | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	6,688	3,496
POC Imaging | International | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	6,658	1,358
PVD | North America | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	6,864	4,504
PVD | International | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	1,334	851
OVP | North America | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	3,781	3,348
OVP | International | Operating Segments
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, net	$ 23,231	$ 3,004

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REVENUE - Performance Obligations (Details) $ in Thousands	Mar. 31, 2021 USD ($)
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 148,788
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-04-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 26,196
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected timing of satisfaction	9 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 32,891
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected timing of satisfaction	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 29,476
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected timing of satisfaction	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 24,369
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected timing of satisfaction	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 18,276
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected timing of satisfaction	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 17,580
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected timing of satisfaction

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ACQUISITION AND RELATED PARTY ITEMS - Additional Information (Details) $ in Thousands			3 Months Ended
	Feb. 01, 2021 USD ($)	Apr. 01, 2020 USD ($)	Mar. 31, 2021 USD ($) segment	Mar. 31, 2020 USD ($)	Feb. 21, 2021	Dec. 31, 2020 USD ($)
Business Acquisition [Line Items]
Goodwill			$ 89,968			$ 88,276
Operating lease right-of-use assets			$ 5,089			5,457
Affiliated Entity | CVM Practice
Business Acquisition [Line Items]
Number of warehouses | segment			2
Operating lease, payments			$ 8	$ 0
Operating lease right-of-use assets			200			200
Operating lease, liability			200			$ 200
Lacuna Diagnostics, Inc.
Business Acquisition [Line Items]
Percentage of voting interest acquired					100.00%
Purchase price	$ 4,255
Business combination, indemnification liabilities, holdback	$ 400
Business combination, indemnification liabilities, holdback release period	18 months
Business combination, contingent consideration, liability	$ 2,000
Business acquisition, initial earn out period	12 months
Business combination, contingent consideration arrangements, liability performance reduction	$ 1,000
Fair value of contingent consideration	1,700
Goodwill	3,900
Purchase price	5,955
Lacuna Diagnostics, Inc. | North America
Business Acquisition [Line Items]
Goodwill	$ 3,900
Scil Animal Care Company
Business Acquisition [Line Items]
Percentage of voting interest acquired		100.00%
Goodwill		$ 46,000
Purchase price		110,290
Unrecognized tax benefits, decrease resulting from acquisition			1,100
Unrecognized tax benefits			$ 700
Scil Animal Care Company | North America
Business Acquisition [Line Items]
Goodwill		8,700
Scil Animal Care Company | International
Business Acquisition [Line Items]
Goodwill		$ 37,300

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ACQUISITION AND RELATED PARTY ITEMS - Fair Value of Assets and Liabilities at Lacuna Acquisition Date (Details) - USD ($) $ in Thousands	Feb. 01, 2021	Mar. 31, 2021	Dec. 31, 2020
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Less Noncontrolling Interest [Abstract]
Goodwill		$ 89,968	$ 88,276
Lacuna Diagnostics, Inc.
Business Combination, Consideration Transferred, Including Equity Interest in Acquiree Held Prior to Combination [Abstract]
Purchase price	$ 4,255
Fair value of contingent consideration	1,700
Total purchase consideration	5,955
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Less Noncontrolling Interest [Abstract]
Cash and cash equivalents	3
Accounts receivable	170
Property and equipment, net	530
Other intangible assets, net	1,185
Deferred tax asset	167
Total assets acquired	2,055
Goodwill	3,900
Total fair value of consideration transferred	$ 5,955

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ACQUISITION AND RELATED PARTY ITEMS - Fair Values of Assets and Liabilties at Scil Acquisition Date (Details) - USD ($) $ in Thousands	Apr. 01, 2020	Mar. 31, 2021	Dec. 31, 2020
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Less Noncontrolling Interest [Abstract]
Goodwill		$ 89,968	$ 88,276
Scil Animal Care Company
Business Combination, Consideration Transferred, Including Equity Interest in Acquiree Held Prior to Combination [Abstract]
Total purchase consideration	$ 110,290
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Less Noncontrolling Interest [Abstract]
Cash and cash equivalents	5,889
Accounts receivable	10,707
Inventories	11,278
Net investment in leases, current	311
Prepaid expenses	1,692
Other current assets	1,338
Property and equipment, net	19,320
Operating lease right-of-use assets	877
Other intangible assets, net	44,517
Net investment in leases, non-current	1,027
Investments in unconsolidated affiliates	55
Other non-current assets	291
Total assets acquired	97,302
Accounts payable	8,221
Accrued liabilities	7,067
Operating lease liabilities, current	356
Deferred revenue, current, and other	3,220
Deferred revenue, non-current	94
Operating lease liabilities, non-current	529
Deferred tax liability	13,249
Other liabilities	276
Net assets acquired	64,290
Goodwill	46,000
Total fair value of consideration transferred	$ 110,290

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ACQUISITION AND RELATED PARTY ITEMS - Intangible Assets Acquired, Amortization Method (Details) - USD ($) $ in Thousands	Feb. 01, 2021	Apr. 01, 2020	Mar. 31, 2021	Dec. 31, 2020
Business Acquisition [Line Items]
Gross Carrying Amount			$ 63,519	$ 64,229
Lacuna Diagnostics, Inc.
Business Acquisition [Line Items]
Gross Carrying Amount	$ 1,185
Scil Animal Care Company
Business Acquisition [Line Items]
Gross Carrying Amount		$ 44,517
Scil Animal Care Company | Trade names
Business Acquisition [Line Items]
Indefinite-lived intangible assets acquired		$ 7,556
Developed technology | Lacuna Diagnostics, Inc.
Business Acquisition [Line Items]
Useful Life	3 years
Finite-lived intangible assets acquired	$ 1,000
Customer relationships | Lacuna Diagnostics, Inc.
Business Acquisition [Line Items]
Useful Life	6 months
Finite-lived intangible assets acquired	$ 150
Customer relationships | Scil Animal Care Company
Business Acquisition [Line Items]
Useful Life		10 years
Finite-lived intangible assets acquired		$ 36,272
Internally developed software | Scil Animal Care Company
Business Acquisition [Line Items]
Useful Life		7 years
Finite-lived intangible assets acquired		$ 353
Backlog | Scil Animal Care Company
Business Acquisition [Line Items]
Useful Life		2 months 12 days
Finite-lived intangible assets acquired		$ 210
Non-compete agreements | Scil Animal Care Company
Business Acquisition [Line Items]
Useful Life		2 years
Finite-lived intangible assets acquired		$ 60
Trade names | Lacuna Diagnostics, Inc.
Business Acquisition [Line Items]
Useful Life	11 months
Finite-lived intangible assets acquired	$ 35
Trade names | Scil Animal Care Company
Business Acquisition [Line Items]
Useful Life		9 months 18 days
Finite-lived intangible assets acquired		$ 66

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ACQUISITION AND RELATED PARTY ITEMS - Unaudited Pro Forma Financial Information (Details) - Scil Animal Care Company $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)
Business Acquisition [Line Items]
Revenue, net	$ 49,205
Net (loss) income before equity in losses of unconsolidated affiliates	(6,125)
Net (loss) income attributable to Heska Corporation	$ (6,104)

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INVESTMENTS IN UNCONSOLIDATED AFFILIATES (Details) - USD ($) $ in Thousands	Sep. 24, 2018	Aug. 08, 2018	Mar. 31, 2021	Dec. 31, 2020
Schedule of Equity Method Investments [Line Items]
Equity method investment			$ 3,500	$ 3,686
Non-marketable equity security investment			3,018	3,018
Investments			$ 6,518	$ 6,704
General Fluidics Corporation
Schedule of Equity Method Investments [Line Items]
Supply commitment term	15 years
General Fluidics Corporation
Schedule of Equity Method Investments [Line Items]
Payments to acquire equity method investments	$ 5,100
Ownership percentage			29.10%
MBio Diagnostics, Inc.
Schedule of Equity Method Investments [Line Items]
Payments to acquire non-marketable securities		$ 3,000
Intangible asset acquired		$ 1,000
Intangible assets acquired, useful life		20 years
Contingent consideration on milestones		$ 10,000

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INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Income Tax Disclosure [Abstract]
Income (loss) before income taxes and equity in losses of unconsolidated affiliates	$ 492	$ (6,817)
Total income tax benefit	(1,565)	(1,508)
Cash paid for income taxes	496	7
Excess tax benefits related to employee share-based compensation	500	$ 300
Deferred tax assets, gross	9,400
Deferred tax assets, valuation allowance	4,400
Valuation allowance, deferred tax asset, increase (decrease)	$ 1,100

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LEASES - Operating and Financing Lease Balances (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Leases [Abstract]
Operating lease right-of-use assets	$ 5,089	$ 5,457
Property and equipment, net	1,745	1,907
Total Leased Assets	6,834	7,364
Operating lease liabilities, current	2,015	2,087
Operating lease liabilities, non-current	3,571	3,858
Deferred revenue, current, and other	229	295
Other liabilities	224	261
Total Lease Liabilities	$ 6,039	$ 6,501

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LEASES - Sales-type Leases and Lease Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Leases [Abstract]
Sales-type lease revenue	$ 1,658	$ 1,244
Sales-type lease cost of revenue	1,264	869
Profit recognized at commencement for sales-type leases	394	375
Operating lease income	$ 608	$ 0

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Earnings Per Share [Abstract]
Net (loss) income attributable to Heska Corporation	$ 1,871	$ (5,288)
Basic weighted-average common shares outstanding (in shares)	9,478	7,568
Dilutive effect of stock options and restricted stock awards (in shares)	366	0
Diluted weighted-average common shares outstanding (in shares)	9,844	7,568
Basic (loss) earnings per share attributable to Heska Corporation (in dollars per share)	$ 0.20	$ (0.70)
Diluted (loss) earnings per share attributable to Heska Corporation (in dollars per share)	$ 0.19	$ (0.70)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options and restricted units excluded from computation of earnings per share	996	1,687
Convertible preferred stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options and restricted units excluded from computation of earnings per share	0	1,509
Convertible Senior Notes
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options and restricted units excluded from computation of earnings per share	996	43
Stock options and restricted stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options and restricted units excluded from computation of earnings per share	0	135

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GOODWILL AND OTHER INTANGIBLES (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Goodwill [Roll Forward]
Goodwill, Beginning Balance	$ 88,276
Goodwill attributable to acquisitions (subject to change)	3,900
Foreign currency adjustments	(2,208)
Goodwill, Ending Balance	89,968
Finite-Lived Intangible Assets, Net [Abstract]
Accumulated amortization	(9,640)		$ (8,237)
Net carrying amount	45,870
Indefinite-lived Intangible Assets [Line Items]
Indefinite-lived intangible assets	8,009
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Gross Carrying Amount	63,519		64,229
Accumulated amortization	(9,640)		(8,237)
Net intangible assets	53,879		55,992
Amortization expense	$ 1,404	$ 428
Remaining weighted average amortization period for intangible assets	8 years 3 months 18 days
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
2021 (remaining)	$ 4,683
2022	6,038
2023	5,677
2024	5,245
2025	5,190
Thereafter	19,037
Net carrying amount	45,870
Indefinite-lived intangible assets	8,009
Net intangible assets	53,879		55,992
Trade names
Indefinite-lived Intangible Assets [Line Items]
Indefinite-lived intangible assets	8,009		8,374
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Indefinite-lived intangible assets	8,009		8,374
Customer relationships and other
Finite-Lived Intangible Assets, Net [Abstract]
Gross carrying amount	45,636		46,989
Accumulated amortization	(7,551)		(6,436)
Net carrying amount	38,085		40,553
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Accumulated amortization	(7,551)		(6,436)
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Net carrying amount	38,085		40,553
Developed technology
Finite-Lived Intangible Assets, Net [Abstract]
Gross carrying amount	9,647		8,669
Accumulated amortization	(1,971)		(1,696)
Net carrying amount	7,676		6,973
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Accumulated amortization	(1,971)		(1,696)
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Net carrying amount	7,676		6,973
Trade names
Finite-Lived Intangible Assets, Net [Abstract]
Gross carrying amount	227		197
Accumulated amortization	(118)		(105)
Net carrying amount	109		92
Intangible Assets, Net (Excluding Goodwill) [Abstract]
Accumulated amortization	(118)		(105)
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Net carrying amount	109		$ 92
Operating Segments | North America
Goodwill [Roll Forward]
Goodwill, Beginning Balance	35,414
Goodwill attributable to acquisitions (subject to change)	3,900
Foreign currency adjustments	0
Goodwill, Ending Balance	39,314
Operating Segments | International
Goodwill [Roll Forward]
Goodwill, Beginning Balance	52,862
Goodwill attributable to acquisitions (subject to change)	0
Foreign currency adjustments	(2,208)
Goodwill, Ending Balance	$ 50,654

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PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 74,057		$ 73,290
Less accumulated depreciation	(39,194)		(37,748)
Total property and equipment, net	34,863		35,542
Depreciation and amortization	1,900	$ 900
Land
Property, Plant and Equipment [Line Items]
Property and equipment, gross	2,493		2,590
Building
Property, Plant and Equipment [Line Items]
Property and equipment, gross	12,310		12,737
Machinery and equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	41,559		40,411
Office furniture and equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	2,033		2,047
Computer hardware and software
Property, Plant and Equipment [Line Items]
Property and equipment, gross	4,885		4,773
Leasehold and building improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	10,728		10,728
Construction in progress
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 49		4
Machinery and equipment | Minimum
Property, Plant and Equipment [Line Items]
Property plant and equipment, useful life	5 years
Machinery and equipment | Maximum
Property, Plant and Equipment [Line Items]
Property plant and equipment, useful life	7 years
Leased equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 14,400		13,600
Less accumulated depreciation	$ (5,000)		$ (4,700)

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INVENTORIES, NET (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Inventory Disclosure [Abstract]
Raw materials	$ 13,028	$ 14,454
Work in process	4,204	4,262
Finished goods	22,125	21,321
Total inventory, net	$ 39,357	$ 40,037

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ACCRUED LIABILITIES (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Payables and Accruals [Abstract]
Accrued payroll and employee benefits	$ 5,961	$ 7,949
Accrued property taxes	547	659
Accrued purchase orders	1,126	1,549
Accrued taxes	3,882	3,731
Other	3,404	4,167
Total accrued liabilities	$ 14,920	$ 18,055
Percentage of total current liabilities	5.00%

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CAPITAL STOCK - STOCK OPTIONS AND RESTRICTED STOCK (Details)	3 Months Ended
	Mar. 31, 2021 $ / shares shares
Options/Awards Granted
Stock options (in shares) | shares	0
Restricted stock awards (in shares) | shares	235,000
Weighted-Average Grant Date Fair Value (per option/award)
Stock options (in dollars per share) | $ / shares	$ 0
Restricted stock awards (in dollars per share) | $ / shares	$ 154.48

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CAPITAL STOCK - ADDITIONAL INFORMATION (Details) - USD ($) $ / shares in Units, $ in Millions	Mar. 05, 2021	Mar. 31, 2021	Dec. 31, 2020
Subsidiary, Sale of Stock [Line Items]
Common stock, par value (in dollars per share)		$ 0.01	$ 0.01
Equity Offering, 2021
Subsidiary, Sale of Stock [Line Items]
Sale of stock, number of shares issued in transaction (in shares)	940,860
Common stock, par value (in dollars per share)	$ 0.01
Sale of stock, price per share (in dollars per share)	$ 186.00
Sale of stock, consideration received on transaction	$ 164.2
Over-Allotment Option
Subsidiary, Sale of Stock [Line Items]
Sale of stock, price per share (in dollars per share)	$ 186.00
Sale of stock, number of shares authorized (in shares)	141,129
Sale of stock, over-allotment option period	30 days

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ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($)
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning balance	$ 287,053
Ending balance	425,273
Total Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning balance	14,169
Current period other comprehensive loss	(5,383)
Ending balance	8,786
Pension Adjustments
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning balance	(386)
Current period other comprehensive loss	0
Ending balance	(386)
Foreign Currency Translation1
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning balance	5,872
Current period other comprehensive loss	(2,271)
Ending balance	3,601
Foreign Currency Gain (Loss) on Intra-Entity Transactions2
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning balance	8,683
Current period other comprehensive loss	(3,112)
Ending balance	$ 5,571

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COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions	Mar. 31, 2021	Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]
Warranty reserve	$ 0.5	$ 0.5
Unconditional annual minimum inventory purchases	$ 50.1

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INTEREST AND OTHER EXPENSE, NET (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Other Income and Expenses [Abstract]
Interest income	$ (389)	$ (233)
Interest expense	920	2,346
Other, net	(5)	86
Total interest and other expense, net	526	2,199
Cash paid for interest	$ 1,600	$ 1,600

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CONVERTIBLE NOTES AND CREDIT FACILITY - Convertible Notes Narrative (Details)		3 Months Ended
	Sep. 17, 2019 USD ($)	Mar. 31, 2021 USD ($) $ / shares	Mar. 31, 2020 USD ($)	Jan. 01, 2021	Dec. 31, 2020 USD ($)
Debt Instrument [Line Items]
Debt instrument, convertible, remaining discount amortization period		66 months
Share price | $ / shares		$ 168.46
Convertible Senior Notes
Debt Instrument [Line Items]
Proceeds from convertible debt	$ 83,700,000
Debt instrument, convertible, conversion ratio	0.0115434
Debt instrument, convertible, if-converted value in excess of principal		$ 81,500,000
Convertible Debt | Convertible Senior Notes
Debt Instrument [Line Items]
Aggregate principal amount	$ 86,250,000	86,250,000			$ 86,250,000
Debt instrument, interest rate, stated percentage	3.75%
Interest expense, debt		911,000	$ 2,333,000
Convertible Debt | Convertible Senior Notes | Accounting Standards Update 2020-06
Debt Instrument [Line Items]
Debt instrument, interest rate, effective percentage				4.35%
Fair Value, Inputs, Level 2 | Convertible Senior Notes
Debt Instrument [Line Items]
Convertible debt, fair value		$ 180,400,000			$ 156,900,000
Initial Purchasers | Convertible Debt | Convertible Senior Notes
Debt Instrument [Line Items]
Aggregate principal amount	$ 11,250,000

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CONVERTIBLE NOTES AND CREDIT FACILITY - Carrying Amount of Debt (Details) - Convertible Debt - Convertible Senior Notes - USD ($)	Mar. 31, 2021	Dec. 31, 2020	Sep. 17, 2019
Debt Instrument [Line Items]
Aggregate principal amount	$ 86,250,000	$ 86,250,000	$ 86,250,000
Unamortized debt discount	(2,529,000)	(37,791,000)
Net carrying amount	$ 83,721,000	$ 48,459,000

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CONVERTIBLE NOTES AND CREDIT FACILITY - Interest Expense (Details) - Convertible Debt - Convertible Senior Notes - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Debt Instrument [Line Items]
Interest expense related to contractual coupon interest	$ 809	$ 809
Interest expense related to amortization of the debt discount	102	1,524
Interest expense, debt	$ 911	$ 2,333

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NOTE RECEIVABLES (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Net carrying amount	$ 6,709	$ 6,671
Equity Method Investee | Convertible Note Receivable
Debt Instrument [Line Items]
Principal amount	6,650	6,650
Unamortized discount	(903)	(977)
Net carrying amount	5,747	5,673
Equity Method Investee | Notes Receivable
Debt Instrument [Line Items]
Principal amount	9,000	0
Unamortized discount	(298)	0
Net carrying amount	$ 8,702	$ 0

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NOTE RECEIVABLES - Additional Information (Details) - USD ($)			3 Months Ended
	Feb. 01, 2021	Dec. 09, 2020	Mar. 31, 2021	Mar. 31, 2020	Jan. 01, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Principal amount			$ 9,000,000	$ 0
Accounting Standards Update 2020-06 | Convertible Senior Notes | Convertible Debt
Debt Instrument [Line Items]
Debt instrument, interest rate, effective percentage					4.35%
Equity Method Investee | Convertible Note Receivable
Debt Instrument [Line Items]
Principal amount		$ 6,650,000
Related party transaction, rate		3.00%
Related party transaction, effective interest rate		8.69%
Embedded derivative, fair value of embedded derivative asset			1,000,000.0			$ 1,000,000.0
Accounts and financing receivable, allowance for credit loss			33,000
Equity Method Investee | Notes Receivable
Debt Instrument [Line Items]
Principal amount	$ 9,000,000.0
Related party transaction, rate	10.00%
Related party transaction, effective interest rate	10.99%
Embedded derivative, fair value of embedded derivative asset			300,000
Accounts and financing receivable, allowance for credit loss			$ 300,000

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SEGMENT REPORTING - NARRATIVE (Details)	3 Months Ended
	Mar. 31, 2021 segment
Segment Reporting [Abstract]
Number of reportable segments	2

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SEGMENT REPORTING (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Segment Reporting, Other Significant Reconciling Item [Line Items]
Revenue, net	$ 60,503	$ 30,654
Cost of revenue	35,033	17,206
Gross profit	$ 25,470	$ 13,448
Gross margin	42.00%	44.00%
Operating income (loss)	$ 1,018	$ (4,618)
Total assets	569,573		$ 399,839
North America | Operating Segments
Segment Reporting, Other Significant Reconciling Item [Line Items]
Revenue, net	37,272	27,650
Cost of revenue	19,763	15,146
Gross profit	$ 17,509	$ 12,504
Gross margin	47.00%	45.00%
Operating income (loss)	$ 1,033	$ (4,093)
Total assets	413,913		238,550
International | Operating Segments
Segment Reporting, Other Significant Reconciling Item [Line Items]
Revenue, net	23,231	3,004
Cost of revenue	15,270	2,060
Gross profit	$ 7,961	$ 944
Gross margin	34.00%	31.00%
Operating income (loss)	$ (15)	$ (525)
Total assets	$ 155,660		$ 161,289