The Company has stock incentive plans which authorize granting of stock options, restricted stock awards, restricted stock units, and stock purchase rights to our employees, officers, directors and consultants. In 1997, the board of directors adopted the 1997 Stock Incentive Plan (the "1997 Plan"), which was later amended in December 2018 to be renamed the "Stock Incentive Plan." In May 2012, stockholders approved an amendment allowing for an increase of 250,000 shares and an annual increase through 2016 based on the number of non-employee directors serving as of our Annual Meeting of Stockholders, subject to a maximum of 45,000 shares per year. The plan was further amended in May 2016, May 2018, and April 2020 to increase the number of shares authorized for issuance by 500,000, 250,000, and 300,000 shares, respectively. In May 2003, the stockholders approved a new plan, the 2003 Equity Incentive Plan (the "2003 Plan"), which allows for the granting of stock options/restricted stock for up to 239,050 shares of the Company's common stock. In May 2021, stockholders approved the Heska Corporation Equity Incentive Plan (the "Stock Plan") that replaced the Stock Incentive Plan and the 2003 Plan and includes a reserve for an additional 250,000 shares of common stock along with any shares that remained available for grant under the prior plans. The total number of shares reserved for issuance as of December 31, 2022 was 132,024.

The stock options granted by the Board of Directors may be either incentive stock options ("ISOs") or non-qualified stock options ("NQs") and may include time-based vesting terms and/or be tied to Company and market-related performance metrics. The exercise price for options under all of the plans may be no less than 100% of the fair value of the underlying common stock. Options granted will expire no later than the tenth anniversary subsequent to the date of grant or three months following termination of employment, except in cases of death or disability, in which case the options will remain exercisable for up to twelve months. Under the terms of the Stock Incentive Plan, in the event we are sold or merged, outstanding options will either be assumed by the surviving corporation or vest immediately.

We use the Black-Scholes option-pricing model to estimate the fair value of time-vested and performance stock options granted, which includes four key inputs: expected term, expected volatility, risk-free interest rate and expected dividends. Our expected term is estimated based on historical exercise patterns. Our expected volatility input was estimated based on our historical stock price volatility. Our risk-free interest rate input was determined based on the U.S. Treasury yield curve at the time of option issuance. Our expected dividends inputs were zero in all periods as we did not anticipate paying dividends in the foreseeable future. For options tied to market performance, the fair value used in our expense recognition method is measured based on the number of shares granted, and a Monte Carlo simulation model, which incorporates the probability of the achievement of the market-related performance goals as part of the grant date fair value. We recognize forfeitures as they occur. No stock options were granted during 2022.


	Year Ended December 31,
	2022
	Options	Weighted Average Exercise Price
Outstanding at beginning of period	420,202	$	64.06
Granted at market	—	$	—
Forfeited	(7,416)	$	122.56
Expired	(291)	$	150.29
Exercised	(72,457)	$	25.87
Outstanding at end of period	340,038	$	70.84
Exercisable at end of period	322,662	$	66.18

The total estimated fair value of time vesting stock options granted was computed to be approximately $1.6 million and $2.4 million during the years ended December 31, 2021 and 2020, respectively. The amounts are amortized ratably over the requisite service periods of the options. The weighted average estimated fair value per option of options granted was computed to be approximately $82.77 and $28.66 during the years ended December 31, 2021 and 2020, respectively. The total intrinsic value of options exercised was $7.2 million, $9.9 million and $5.0 million during the years ended December 31, 2022, 2021 and 2020, respectively. The cash proceeds from options exercised were $2.2 million, $3.3 million and $3.4 million during the years ended December 31, 2022, 2021 and 2020, respectively.

The following table summarizes information about time vesting stock options outstanding and exercisable at December 31, 2022.


	Options Outstanding				Options Exercisable
Exercise Prices	Number of Options Outstanding	Weighted Average Remaining Contractual Life in Years	Weighted Average Exercise Price		Number of Options Exercisable	Weighted Average Remaining Contractual Life in Years	Weighted Average Exercise Price
$7.36 - $21.09	36,148	1.41	$	12.49	36,148	1.41	$	12.49
$21.10 - $69.76	89,717	6.11	$	54.97	89,717	6.11	$	54.97
$69.77 - $71.83	80,851	5.33	$	69.81	80,851	5.33	$	69.81
$71.84 - $95.65	86,131	5.80	$	79.59	86,131	5.80	$	79.59
$95.66 - $188.62	47,191	7.05	$	131.51	29,815	6.46	$	116.40
$7.36 - $188.62	340,038	5.48	$	70.84	322,662	5.34	$	66.18

As of December 31, 2022, there was approximately $0.8 million of total unrecognized compensation cost related to outstanding time vesting stock options. That cost is expected to be recognized over a weighted-average period of 1.1 years with all cost to be recognized by the end of May 2024, assuming all options vest according to the vesting schedules in place at December 31, 2022. As of December 31, 2022, the aggregate intrinsic value of outstanding options was approximately $2.4 million and the aggregate intrinsic value of exercisable options was approximately $2.4 million.

The total estimated fair value of performance-based stock options granted was computed to be approximately $2.6 million and $6.0 million during the years ended December 31, 2021 and 2020, respectively. The weighted-average estimated fair value per option of options granted was computed to be approximately $75.62 and $25.04 during the years ended December 31, 2021 and 2020, respectively. As of December 31, 2022, the aggregate intrinsic value of outstanding options was approximately $0.3 million and the aggregate intrinsic value of exercisable options was approximately $0.1 million. As of December 31, 2022, there was approximately $0.4 million of total unrecognized compensation cost related to outstanding performance-based stock options that is expected to be recognized over a weighted-average period of 0.7 years.


	Options Outstanding				Options Exercisable
Exercise Prices	Number of Options Outstanding at December 31, 2022	Weighted Average Remaining Contractual Life in Years	Weighted Average Outstanding Price		Number of Options Exercisable at December 31, 2022	Weighted Average Remaining Contractual Life in Years	Weighted Average Exercise Price
$60.94	210,000	7.29	$	60.94	93,750	7.29	$	60.94
$198.40	34,800	3.44	$	198.40	—	—	$	—
$60.94 - $198.40	244,800	6.75	$	80.48	93,750	7.29	$	60.94

As of December 31, 2022, we reviewed each of the underlying corporate performance targets and determined that approximately 75,000 shares were related to corporate performance targets of which we did not deem achievement probable. The unrecognized compensation cost associated with the performance options not deemed probable, based on grant date fair value, is approximately $1.9 million. Any change in the probability determination could accelerate the recognition of this expense.

We have granted unvested restricted stock awards and restricted stock units (collectively, “restricted stock”) to management and directors pursuant to the Stock Incentive Plan. The restricted stock awards and units have varying vesting periods, but generally become fully vested between one and seven years after the grant date, depending on the specific award, performance targets met for performance based awards granted to management, and vesting period for time based awards. Management performance based awards are granted

at the target amount of shares that may be earned and are tied to future sales targets, product development, profitability measures such as gross margin and operating profit, and/or non-GAAP measures such as EBITDA and adjusted EBITDA margin. We value the restricted stock awards and units related to service and/or company performance targets based on grant date fair value and expense over the period when achievement of those conditions is deemed probable. For restricted stock awards related to market conditions, we utilize a Monte Carlo simulation model to estimate grant date fair value and expense over the requisite period. We recognize forfeitures as they occur.


	Restricted Stock Awards			Restricted Stock Units
	Restricted Stock	Weighted-Average Grant Date Fair Value Per Award		Restricted Stock	Weighted-Average Grant Date Fair Value Per Award
Non-vested as of December 31, 2021	493,513	$	141.98	6,000	$	172.11
Granted	78,236	$	115.91	26,173	$	100.97
Vested	(114,991)	$	90.57	—	$	—
Forfeited	(14,239)	$	91.17	(243)	$	127.09
Non-vested as of December 31, 2022	442,519	$	152.36	31,930	$	114.14

The weighted average grant date fair value per share of awards granted during the year was $115.91, $207.24, and $87.29 for the years ended December 31, 2022, 2021 and 2020, respectively. Fair value of restricted stock vested was $15.8 million, $5.6 million, and $5.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022, there was approximately $16.1 million and $2.1 million of total unrecognized compensation cost related to restricted stock awards and restricted stock units, respectively, with probable Company performance targets, as well as market and time vesting conditions. The Company expects to recognize this expense over a weighted average period of 1.7 years for restricted stock awards and 2.0 years for restricted stock units. As of December 31, 2022, we reviewed each of the underlying corporate performance targets and determined that approximately 222,000 shares of common stock for restricted stock awards and approximately 3,000 shares of common stock for restricted stock units were related to corporate performance targets of which we did not deem achievement probable. The unrecognized compensation cost associated with the restricted stock awards and restricted stock units not deemed probable, based on grant date fair value, is approximately $33.5 million and $0.6 million, respectively. Any change in the probability determination could accelerate the recognition of this expense.

Under the 2020 Employee Stock Purchase Plan (the "ESPP"), we are authorized to issue up to 200,000 shares of common stock to our employees, of which 21,484 had been issued as of December 31, 2022. The ESPP provides for the issuance of shares of our common stock to participating employees. At the end of each designated offering period, which occurs every six months on June 30 and December 31, employees can elect to purchase shares of our common stock with contributions of up to 10% of their base pay, accumulated via payroll deductions, at an amount equal to 85% of the lower of our stock price on (i) the first trading day of the offering period, or (ii) the last trading day of the offering period.

We issued 12,188, 5,437 and 3,859 shares under the ESPP for the years ended December 31, 2022, 2021 and 2020, respectively. In the year ended December 31, 2020, we also issued 6,210 shares under a previous ESPP. The weighted-average fair value of the purchase rights granted was $14.43, $29.56 and $16.19 per share for the years ended December 31, 2022, 2021 and 2020, respectively.

On March 30, 2020, the Company completed a private placement offering in which the Company issued and sold an aggregate of 122,000 shares of its Series X Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock"). The shares of Preferred Stock issued and sold were priced at $1,000 per share (the “Stated Value”), resulting in gross proceeds of $122.0 million, less issuance costs of $0.2 million. The Company used approximately $111.0 million of the proceeds from the offering to fund the April 1, 2020 acquisition of scil and plans to use the remaining proceeds for working capital and general corporate purposes.

The offering was made pursuant to the Securities Purchase Agreement (the “Securities Purchase Agreement”), dated as of January 12, 2020, by and among the Company and certain investors, and subsequent amendment (the “Securities Purchase Agreement Amendment”) to the Securities Purchase Agreement, entered into by the Company and each investor on March 30, 2020 (the Securities Purchase Agreement as amended by the Securities Purchase Agreement Amendment, the “Amended Securities Purchase Agreement”).

The shares of Preferred Stock were convertible into shares of the Company’s Common Stock at an initial ratio of approximately 12.4 shares of Common Stock for each share of Preferred Stock (equivalent to a conversion price of approximately $80.85 per share of common stock), at the option of the holders of the Preferred Stock or the Company, subject to the Company possessing sufficient unissued and otherwise unreserved shares of Common Stock under the Company’s Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”). On April 14, 2020, the Company gave notice of its exercise of its right to convert the 122,000 shares of Preferred Stock into 1,508,964 shares of Public Common Stock (the "Conversion Shares") and the conversion was effective on April 21, 2020. The conversion resulted in dilution of less than 20% of total shares of the Company’s Public Common Stock currently issued and outstanding. A registration statement on Form S-3 (File No. 333-238005) registering the Conversion Shares for resale was filed by us with the SEC on May 5, 2020.

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 met the criteria for equity treatment thereunder. The underwriters’ option was not exercised and expired on April 1, 2021. The Company is 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. See the Consolidated Statements of Cash Flows for further details regarding investing activities completed thus far.