(

)

Commitments and Contingencies

Legal Matters and Routine Proceedings

The Company is a defendant in a putative class action lawsuit, filed in

May 2019,

in the United States District Court for the Southern District of New York seeking injunctive and monetary relief styled Valentin Reid, on behalf of himself and all others similarly situated v. PetMed Express, Inc., Case

No.

-cv-

4169,

alleging that the Company’s website,

www.1800petmeds.com,

does

not

comply with the Americans with Disabilities Act (“ADA”), New York State Human Rights Law (“NYSHRL”), and New York City Human Rights Law (“NYCHRL”), and discriminates against visually impaired individuals. The Company denies any wrongdoing and intends to vigorously defend itself against such allegations. At this stage, the company can neither accurately predict the likelihood of an unfavorable or adverse outcome nor provide an estimate of the amount or range of potential loss, if any.

January 2019,

a putative class action complaint was filed by a different individual in the United States District Court for the Southern District of New York alleging that company’s website,

www.1800petmeds.com,

does

not

comply with the ADA, NYSHRL, and NYCHRL, and discriminates against visually impaired individuals. The Plaintiff named a New York corporation named Pet Meds Inc., which is

not

related or affiliated with the Company, as the defendant. However, the Plaintiff has sought to remedy that error by requesting leave to file an amended complaint naming the Company, which request the Court granted on

April 9, 2019.

April 18, 2019,

the Court granted the Plaintiff’s request to transfer the case to the United States District Court for the Eastern District of New York, where it is currently pending. The matter is styled Brian Fischler, individually and on behalf of all other persons similarly situated v. PetMed Express, Inc.; Case

No.

-cv-

02391.

The Company denies any wrongdoing and it intends to vigorously defend itself against such allegations. At this early juncture, the Company can neither accurately predict the likelihood of an unfavorable or adverse outcome nor provide an estimate of the amount or range of potential loss, if any.

The Company has settled complaints that had been filed with various states’ pharmacy boards in the past. There can be

assurances made that other states will

not

attempt to take similar actions against the Company in the future. The Company initiates litigation to protect its trade or service marks. There can be

assurance that the Company will be successful in protecting its trade or service marks. Legal costs related to the above matters are expensed as incurred.

Operating Leases

Prior to its move to Delray Beach, FL, the Company leased its

65,300

square foot executive offices, warehouse facility, and customer service and pharmacy contact centers under a non-cancelable operating lease in Pompano Beach, Florida. The Company was responsible for certain maintenance costs, taxes, and insurance under this lease. Rent expense was

$519,000

for the fiscal years ended

March 31, 2017.

The Company relocated to the Delray Beach property in the quarter ended

December 31, 2016,

therefore eliminating any future rent payments subsequent to

December 1, 2016.

Upon acquisition of the Delray Beach property in

January 2016,

48%

of the property, approximately

88,000

square feet of the property was leased to

two

tenants. At

March 31, 2019,

the leases with these

two

tenants had a remaining weighted average lease term of

4.5

years. The Company recorded approximately

$622,000

and

$604,000

in rental revenue in fiscal

2019

and

2018,

respectively, which was included in other income. The Company expects to receive the following future lease payments over the next

five

years:

$645,000

in fiscal

2020;

$378,000

in fiscal

2021;

$289,000

in fiscal

2022;

$298,000

in fiscal

2023;

and

$307,000

in fiscal

2024.

Employment Agreements

January 29, 2016,

the Company amended the existing Executive Employment Agreement of Menderes Akdag, the Company’s President, Chief Executive Officer, and Director, and entered into Amendment

No.

to the Executive Employment Agreement with Mr. Akdag. The Agreement amended certain provisions of the Executive Employment Agreement as follows: the term of the Agreement was for

three

years, commencing on

March 16, 2016;

Mr. Akdag’s salary was increased to

$600,000

per year throughout the term of the Agreement, and Mr. Akdag was granted

120,000

shares of restricted stock. The restricted stock was granted on

March 16, 2016,

in accordance with the Company’s

2006

Employee Equity Compensation

Restricted Stock Plan and the restrictions lapse ratably over a

three

-year period. Based on the recommendation of the Compensation Committee of the Board of Directors (“Committee”) and the approval of the Board of Directors (“Board”), the Company amended the existing Executive Employment Agreement of Menderes Akdag, the Company’s President and Chief Executive Officer. On

March 15, 2019,

Amendment

No.

to the Executive Employment Agreement was entered into with Mr. Akdag (“Agreement”). Mr. Akdag’s Executive Employment Agreement was set to expire on

March 16, 2019

pursuant to Amendment

No.

to the Executive Employment Agreement. With the intent to enter into amendment

No.

to the Executive Employment Agreement, the Committee had been working with a nationally recognized compensation consulting firm to ensure executive pay to the Chief Executive Officer of the Company is consistent with a selected peer group and contains appropriate performance benchmarks. At the time of entering into the Agreement, the report from the compensation consulting firm had been received and analyzed, and the Chairman of the Board had presented the results to and was negotiating with the Chief Executive Officer to agree to final terms that would be acceptable to all parties, subject to final Board approval. The Agreement amends certain provisions of the Executive Employment Agreement as follows: the term of the Executive Employment Agreement was extended until

May 13, 2019,

commencing on

March 16, 2019;

and Mr. Akdag’s salary remained at

$600,000

per year throughout the term of the Agreement. See also note

12,

subsequent events.