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 June 30, 2019

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: 000-28827

______________________

PETMED EXPRESS, INC.

(Exact name of registrant as specified in its charter)

______________________

FLORIDA	65-0680967
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

420 South Congress Avenue, Delray Beach, Florida 33445

(Address of principal executive offices, including zip code)

(561) 526-4444

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.001 per share	PETS	NASDAQ Global Select Market

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 (§ 229.405 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, smaller reporting company, or an emerging growth company. See definition 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 (defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 20,174,932 Common Shares, $.001 par value per share at July 30, 2019.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

PETMED EXPRESS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for per share amounts)

	June 30,		March 31,
	2019		2019
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	83,398	$	100,529
Accounts receivable, less allowance for doubtful accounts of $33 and $39, respectively		2,145		2,542
Inventories - finished goods		30,168		21,370
Prepaid expenses and other current assets		1,506		1,408
Prepaid income taxes		-		582
Total current assets		117,217		126,431
Noncurrent assets:
Property and equipment, net		26,760		27,136
Intangible assets		860		860
Total noncurrent assets		27,620		27,996
Total assets	$	144,837	$	154,427
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	15,689	$	16,275
Accrued expenses and other current liabilities		3,325		2,351
Income taxes payable		1,241		-
Total current liabilities		20,255		18,626
Deferred tax liabilities		939		1,121
Total liabilities		21,194		19,747
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.001 par value, 5,000 shares authorized; 3 convertible shares issued and outstanding with a liquidation preference of $4 per share		9		9
Common stock, $.001 par value, 40,000 shares authorized; 20,060 and 20,674 shares issued and outstanding, respectively		20		21
Additional paid-in capital		1,617		12,478
Retained earnings		121,997		122,172
Total shareholders' equity		123,643		134,680
Total liabilities and shareholders' equity	$	144,837	$	154,427

See accompanying notes to condensed consolidated financial statements.

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PETMED EXPRESS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except for per share amounts)(Unaudited)

	Three Months Ended
	June 30,
	2019		2018
Sales	$	79,988	$	87,390
Cost of sales		58,127		57,436
Gross profit		21,861		29,954
Operating expenses:
General and administrative		6,508		6,934
Advertising		8,624		6,707
Depreciation		568		556
Total operating expenses		15,700		14,197
Income from operations		6,161		15,757
Other income:
Interest income, net		567		379
Other, net		257		317
Total other income		824		696
Income before provision for income taxes		6,985		16,453
Provision for income taxes		1,642		3,871
Net income	$	5,343	$	12,582
Comprehensive income	$	5,343	$	12,582
Net income per common share:
Basic	$	0.26	$	0.62
Diluted	$	0.26	$	0.62
Weighted average number of common shares outstanding:
Basic		20,235		20,408
Diluted		20,245		20,449
Cash dividends declared per common share	$	0.27	$	0.25

See accompanying notes to condensed consolidated financial statements.

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PETMED EXPRESS, INC. AND SUBSIDIARIES

condensed consolidated statementS of cash flows

(In thousands)(Unaudited)

	Three Months Ended
	June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	5,343		$	12,582
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		568			556
Share based compensation		635			719
Deferred income taxes		(182	)		(165	)
Bad debt expense		25			32
(Increase) decrease in operating assets and increase (decrease) in liabilities:
Accounts receivable		372			(171	)
Inventories - finished goods		(8,798	)		(1,709	)
Prepaid income taxes		582			788
Prepaid expenses and other current assets		(98	)		(396	)
Accounts payable		(586	)		5,908
Accrued expenses and other current liabilities		934			643
Income taxes payable		1,241			3,247
Net cash provided by operating activities		36			22,034
Cash flows from investing activities:
Purchases of property and equipment		(192	)		(306	)
Net cash used in investing activities		(192	)		(306	)
Cash flows from financing activities:
Repurchase and retirement of common stock		(11,496	)		-
Dividends paid		(5,479	)		(5,103	)
Net cash used in financing activities		(16,975	)		(5,103	)
Net (decrease) increase in cash and cash equivalents		(17,131	)		16,625
Cash and cash equivalents, at beginning of period		100,529			77,936
Cash and cash equivalents, at end of period	$	83,398		$	94,561
Supplemental disclosure of cash flow information:
Dividends payable in accrued expenses	$	243		$	288

See accompanying notes to condensed consolidated financial statements.

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PETMED EXPRESS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Summary of Significant Accounting Policies

Organization

PetMed Express, Inc. and subsidiaries, d/b/a 1-800-PetMeds (the “Company”), is a leading nationwide pet pharmacy. The Company markets prescription and non-prescription pet medications, health products, and supplies for dogs, cats, and horses, direct to the consumer. The Company offers consumers an attractive alternative for obtaining pet medications in terms of convenience, price, and speed of delivery. The Company markets its products through national advertising campaigns, which aim to increase the recognition of the “1-800-PetMeds” brand name, and “PetMeds” family of trademarks, increase traffic on its website at www.1800petmeds.com, acquire new customers, and maximize repeat purchases. The majority of the Company’s sales are to residents in the United States. The Company’s corporate headquarters and distribution facility is located in Delray Beach, Florida. The Company’s fiscal year end is March 31, and references herein to fiscal 2020 or fiscal 2019 refer to the Company's fiscal years ending March 31, 2020 and 2019, respectively.

Basis of Presentation and Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of the Company at June 30, 2019, the Statements of Comprehensive Income for the three months ended June 30, 2019 and 2018, and Cash Flows for the three months ended June 30, 2019 and 2018. The results of operations for the three months ended June 30, 2019 are not necessarily indicative of the operating results expected for the fiscal year ending March 31, 2020. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2019. The Condensed Consolidated Financial Statements include the accounts of PetMed Express, Inc. and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The carrying amounts of the Company's cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued guidance on leases which supersedes the current lease guidance. The core principle requires lessees to recognize the assets and liabilities that arise from nearly all leases in the statement of financial position. Accounting applied by lessors will remain largely consistent with previous guidance. Additional changes are set to align lessor accounting with the revised lessee model and the FASB’s revenue recognition guidance. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this standard on April 1, 2019, using this effective date as the date of initial application.

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Consequently, on adoption, the Company recognized an additional current operating liability of approximately $275,000, with a corresponding right of use asset of approximately the same amount based on the present value of the remaining rental payments under current leasing standards for existing operating leases. The lease liability and right of use asset is reflected in the condensed consolidated balance sheet as part of accrued expenses and other current liabilities and as part of prepaid expenses and other current assets. The amended guidance did not have a material impact on the Company’s condensed consolidated financial statements.

The Company does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, will have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.

Note 2: Revenue Recognition

The Company generates revenue by selling pet medication products and pet supplies. Certain pet supplies offered on the Company’s website are drop shipped to customers. The Company considers itself the principal in the arrangement because the Company controls the specified good before it is transferred to the customer. Revenue contracts contain one performance obligation, which is delivery of the product; customer care and support is deemed not to be a material right to the contract. The transaction price is adjusted at the date of sale for any applicable sales discounts and an estimate of product returns, which are estimated based on historical patterns, however it is not considered a key judgment. There are no amounts excluded from the variable consideration. Revenue is recognized when control transfers to the customer at the point in time in which shipment of the product occurs. This key judgment is determined as the shipping point represents the point in time in which the Company has a present right to payment, title has transferred to the customer, and the customer has assumed the risks and rewards of ownership. Outbound shipping and handling fees are an accounting policy election, and are included in sales as the Company considers itself the principal in the arrangement given responsibility for supplier selection and discretion over pricing. Shipping costs associated with outbound freight after control over a product has transferred to a customer are an accounting policy election and are accounted for as fulfillment costs and are included in cost of sales.

The Company disaggregates revenue in the following two categories: (1) reorder revenue vs new order revenue, and (2) internet revenue vs. contact center revenue. The following table illustrates revenue by various classifications:

Three Months Ended June 30,
Revenue (In thousands)	2019		%			2018		%			$ Variance			% Variance
Reorder Sales	$	67,742		84.7	%	$	71,501		81.8	%	$	(3,759	)		-5.3	%
New Order Sales		12,246		15.3	%		15,889		18.2	%		(3,643	)		-22.9	%
Total Net Sales	$	79,988		100.0	%	$	87,390		100.0	%	$	(7,402	)		-8.5	%
Internet Sales	$	67,023		83.8	%	$	74,320		85.0	%	$	(7,297	)		-9.8	%
Contact Center Sales		12,965		16.2	%		13,070		15.0	%		(105	)		-0.8	%
Total Net Sales	$	79,988		100.0	%	$	87,390		100.0	%	$	(7,402	)		-8.5	%

The majority of the Company’s sales are paid by credit cards and the Company usually receives the cash settlement in two to three banking days. Credit card sales minimize the accounts receivable balances relative to sales. The Company had no material contract asset or liability balances as of June 30, 2019 or March 31, 2019.

Note 3: Net Income Per Share

In accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 260 (“Earnings Per Share”) basic net income per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per common share includes the dilutive effect of potential restricted stock and the effects of the potential conversion of preferred shares, calculated using the treasury stock method. Unvested restricted stock and convertible preferred shares issued by the Company represent the only dilutive effect reflected in the diluted weighted average shares outstanding.

5

The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share computations for the periods presented (in thousands, except for per share amounts):

	Three Months Ended June 30,
	2019		2018
Net income (numerator):
Net income	$	5,343	$	12,582
Shares (denominator):
Weighted average number of common shares outstanding used in basic computation		20,235		20,408
Common shares issuable upon vesting of restricted stock		-		31
Common shares issuable upon conversion of preferred shares		10		10
Shares used in diluted computation		20,245		20,449
Net income per common share:
Basic	$	0.26	$	0.62
Diluted	$	0.26	$	0.62

For the three months ended June 30, 2019 and 2018, 136,601 and 77,350 shares of common restricted stock, respectively, were excluded from the computations of diluted net income per common share, as their inclusion would have had an anti-dilutive effect on diluted net income per common share.

Note 4: Accounting for Stock-Based Compensation

The Company records compensation expense associated with restricted stock in accordance with ASC Topic 718 (“Share Based Payment”) (ASU 2016-09). The compensation expense related to all of the Company’s stock-based compensation arrangements is recorded as a component of general and administrative expenses. The Company had 972,175 restricted common shares issued under the 2006 Employee Equity Compensation Restricted Stock Plan (“2006 Employee Plan”), 85,033 restricted common shares issued under the 2016 Employee Equity Compensation Restricted Stock Plan (“2016 Employee Plan” and collectively referred to with the 2006 Employee Plan as the “Employee Plans”), 272,000 restricted common shares issued under the 2006 Outside Director Equity Compensation Restricted Stock Plan (“2006 Director Plan”), and 97,500 restricted common shares issued under the 2015 Outside Director Equity Compensation Restricted Stock Plan (“2015 Director Plan”, and collectively referred to with the 2006 Director Plan as the “Director Plans”) at June 30, 2019, all shares of which were issued subject to a restriction or forfeiture period that lapses ratably on the first, second, and third anniversaries of the date of grant, and the fair value of which is being amortized over the three-year restriction period.

The Company did not issue any shares of restricted stock during the quarter. For the quarters ended June 30, 2019 and 2018, the Company recognized $635,000 and $719,000, respectively, of compensation expense related to the Employee and Director Plans. At June 30, 2019 and 2018, there was $3.2 million and $3.7 million of unrecognized compensation cost related to the non-vested restricted stock awards, respectively, which is expected to be recognized over the next three years. At June 30, 2019 and 2018, there were 150,000 and 193,000 non-vested restricted shares, respectively.

Note 5: Fair Value

The Company carries cash and cash equivalents and investments at fair value in the Condensed Consolidated Balance Sheets. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. ASC Topic 820 (“Fair Value Measurements”) establishes a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Include other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Unobservable inputs which are supported by little or no market activity.

6

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. At June 30, 2019, the Company had invested the majority of its $83.4 million cash and cash equivalents balance in money market funds which are classified within level 1.

Note 6: Commitments and Contingencies

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. 19-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.

In 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. On 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. 19-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 no 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 no 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.

Note 7: Changes in Shareholders’ Equity:

Changes in shareholders’ equity for the three months ended June 30, 2019 is summarized below (in thousands):

	Additional
	Paid-In			Retained
	Capital			Earnings
Beginning balance at March 31, 2019:	$	12,478		$	122,172
Share based compensation		635			-
Dividends declared		-			(5,518	)
Repurchase and retirement of common stock		(11,496	)		-
Net income		-			5,343
Ending balance at June 30, 2019:	$	1,617		$	121,997

Changes in shareholders’ equity for the three months ended June 30, 2018 is summarized below (in thousands):

	Additional
	Paid-In		Retained
	Capital		Earnings
Beginning balance at March 31, 2018:	$	9,381	$	106,320
Share based compensation		719		-
Dividends declared		-		(5,151	)
Net income		-		12,582
Ending balance at June 30, 2018:	$	10,100	$	113,751

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During the quarter ended June 30, 2019, the Company purchased and retired approximately 613,000 shares of its common stock for approximately $11.5 million. There were no shares of common stock that were purchased or retired in the quarter ended June 30, 2018. At June 30, 2019, the Company had approximately $28.7 million remaining under the Company’s share repurchase plan.

Note 8: Income Taxes

For the quarters ended June 30, 2019 and 2018, the Company recorded an income tax provision of approximately $1.6 million and $3.9 million, respectively. The effective tax rates for both the quarters ended June 30, 2019 and 2018 was approximately 23.5%.

Note 9: Subsequent Events

On July 22, 2019, the Board of Directors declared a quarterly dividend of $0.27 per share. The Board established an August 2, 2019 record date and an August 9, 2019 payment date. Based on the outstanding share balance as of July 30, 2019 the Company estimates the dividend payable to be approximately $5.4 million.

On July 26, 2019, the Board of Directors approved the issuance of 40,000 restricted shares to the Company’s CEO, under the terms of the CEO’s amended Executive Employment Agreement, and 37,125 restricted shares to certain employees of the Company, pursuant to the 2016 Employee Plan. The Board also approved the issuance of 37,500 restricted shares to the independent directors, pursuant to the 2015 Director Plan.

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ITEM 2.        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Executive Summary

PetMed Express was incorporated in the state of Florida in January 1996. The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “PETS”. The Company began selling pet medications and other pet health products in September 1996. In March 2010 the Company started offering for sale additional pet supplies on its website, and these items are drop shipped to customers by third party vendors. Presently, the Company’s product line includes approximately 2,500 SKUs of the most popular pet medications, health products, and supplies for dogs, cats, and horses.

The Company markets its products through national advertising campaigns which aim to increase the recognition of the “1-800-PetMeds” brand name, and “PetMeds” family of trademarks, increase traffic on its website at www.1800petmeds.com, acquire new customers, and maximize repeat purchases. Approximately 84% of all sales were generated via the Internet for the quarter ended June 30, 2019, compared to 85% for the quarter ended June 30, 2018. The Company’s sales consist of products sold mainly to retail consumers. The three-month average purchase was approximately $86 and $90 per order for the quarters ended June 30, 2019 and 2018, respectively.

Critical Accounting Policies

Our discussion and analysis of our financial condition and the results of our operations contained herein are based upon our Condensed Consolidated Financial Statements and the data used to prepare them. The Company’s Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. On an ongoing basis we re-evaluate our judgments and estimates including those related to product returns, bad debts, inventories, and income taxes. We base our estimates and judgments on our historical experience, knowledge of current conditions, and our beliefs of what could occur in the future considering available information. Actual results may differ from these estimates under different assumptions or conditions. Our estimates are guided by observing the following critical accounting policies.

Revenue recognition

The Company generates revenue by selling pet medication products and pet supplies mainly to retail customers. Certain pet supplies offered on the Company’s website are drop shipped to customers. The Company considers itself the principal in the arrangement because the Company controls the specified good before it is transferred to the customer. Revenue contracts contain one performance obligation, which is delivery of the product; customer care and support is deemed not to be a material right to the contract. The transaction price is adjusted at the date of sale for any applicable sales discounts and an estimate of product returns, which are estimated based on historical patterns, however it is not considered a key judgment. There are no amounts excluded from variable consideration. Revenue is recognized when control transfers to the customer at the point in time in which shipment of the product occurs. This key judgment is determined as the shipping point represents the point in time in which the Company has a present right to payment, title has transferred to the customer, and the customer has assumed the risks and rewards of ownership.

Outbound shipping and handling fees are an accounting policy election, and are included in sales as the Company considers itself the principal in the arrangement given responsibility for supplier selection and discretion over pricing. Shipping costs associated with outbound freight after control over a product has transferred to a customer are an accounting policy election and are accounted for as fulfillment costs and are included in cost of sales. The majority of the Company’s sales are paid by credit cards and the Company usually receives the cash settlement in two to three banking days. Credit card sales minimize accounts receivable balances relative to sales.

The Company maintains an allowance for doubtful accounts for losses that the Company estimates will arise from customers’ inability to make required payments, arising from either credit card charge-backs or insufficient funds checks. The Company determines its estimates of the un-collectability of accounts receivable by analyzing historical bad debts and current economic trends. The allowance for doubtful accounts was approximately $33,000 at June 30, 2019, compared to $39,000 at March 31, 2019.

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Valuation of inventory

Inventories consist of prescription and non-prescription pet medications and pet supplies that are available for sale and are priced at the lower of cost or net realizable value using a weighted average cost method. The Company writes down its inventory for estimated obsolescence. The inventory reserve was approximately $76,000 at June 30, 2019 compared to $54,000 at March 31, 2019.

Advertising

The Company's advertising expense consists primarily of Internet marketing, direct mail/print, and television advertising. Internet costs are expensed in the month incurred and direct mail/print advertising costs are expensed when the related brochures and postcards are produced, distributed, or superseded. Television advertising costs are expensed as the advertisements are televised.

Accounting for income taxes

The Company accounts for income taxes under the provisions of ASC Topic 740 (“Accounting for Income Taxes”), which generally requires recognition of deferred tax assets and liabilities for the expected future tax benefits or consequences of events that have been included in the Company’s Condensed Consolidated Financial Statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting carrying values and the tax bases of assets and liabilities, and are measured by applying enacted tax rates and laws for the taxable years in which those differences are expected to reverse.

Results of Operations

The following should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and the related notes thereto included elsewhere herein. The following table sets forth, as a percentage of sales, certain operating data appearing in the Company’s Condensed Consolidated Statements of Comprehensive Income:

	Three Months Ended
	June 30,
	2019			2018
Sales		100.0	%		100.0	%
Cost of sales		72.7			65.7
Gross profit		27.3			34.3
Operating expenses:
General and administrative		8.1			7.9
Advertising		10.8			7.7
Depreciation		0.7			0.7
Total operating expenses	19.6				16.3
Income from operations		7.7			18.0
Total other income		1.0			0.8
Income before provision for income taxes		8.7			18.8
Provision for income taxes		2.0			4.4
Net income		6.7	%		14.4	%

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Three Months Ended June 30, 2019 Compared With Three Months Ended June 30, 2018

Sales

Sales decreased by approximately $7.4 million, or 8.5%, to approximately $80.0 million for the quarter ended June 30, 2019, from approximately $87.4 million for the quarter ended June 30, 2018. The decrease in sales for the three months ended June 30, 2019 was primarily due to decreased new order and reorder sales. The Company acquired approximately 140,000 new customers for the quarter ended June 30, 2019 compared to approximately 169,000 new customers for the quarter ended June 30, 2018. The following table illustrates sales by various sales classifications:

Three Months Ended June 30,
Sales (In thousands)	2019		%			2018		%			$ Variance			% Variance
Reorder Sales	$	67,742		84.7	%	$	71,501		81.8	%	$	(3,759	)		-5.3	%
New Order Sales		12,246		15.3	%		15,889		18.2	%		(3,643	)		-22.9	%
Total Net Sales	$	79,988		100.0	%	$	87,390		100.0	%	$	(7,402	)		-8.5	%
Internet Sales	$	67,023		83.8	%	$	74,320		85.0	%	$	(7,297	)		-9.8	%
Contact Center Sales		12,965		16.2	%		13,070		15.0	%		(105	)		-0.8	%
Total Net Sales	$	79,988		100.0	%	$	87,390		100.0	%	$	(7,402	)		-8.5	%

Going forward sales may be adversely affected due to increased competition and consumers giving more consideration to price. No guarantees can be made that sales will grow in the future. The majority of our product sales are affected by the seasons, due to the seasonality of mainly heartworm, and flea and tick medications. For the quarters ended June 30, September 30, December 31, and March 31 of Fiscal 2019, the Company’s sales were approximately 31%, 25%, 21%, and 23%, respectively.

Cost of sales

Cost of sales increased by approximately $691,000, or 1.2%, to approximately $58.1 million for the quarter ended June 30, 2019, from approximately $57.4 million for the quarter ended June 30, 2018. As a percentage of sales, cost of sales was 72.7% and 65.7% for the quarters ended June 30, 2019 and 2018. The cost of sales increases can be attributed to price reductions given to customers to stimulate sales in response to increased online competition, and an increase in product costs during the quarter. One of our long-term strategic initiatives and primary purchasing goals has always been to have direct purchasing relationships with the major manufacturers. We made further progress on this initiative and having direct relationships may help lower inventory costs in the future.

Gross profit

Gross profit decreased by approximately $8.1 million, or 27%, to approximately $21.9 million for the quarter ended June 30, 2019, from approximately $30.0 million for the quarter ended June 30, 2018. The decrease in gross profit is directly related to the decrease in sales during the quarter ended June 30, 2019. Gross profit as a percentage of sales was 27.3% and 34.3% for the quarters ended June 30, 2019 and 2018, respectively. The gross profit percentage decrease can be mainly attributed to price reductions given to customers to stimulate sales in response to increased online competition, and an increase in product costs during the quarter. Having direct relationships with the major manufacturers may help improve gross margins in the future.

General and administrative expenses

General and administrative expenses decreased by approximately $426,000, or 6.1%, to approximately $6.5 million for the quarter ended June 30, 2019, from approximately $6.9 million for the quarter ended June 30, 2018. The decrease in general and administrative expenses for the three months ended June 30, 2019 was primarily due to the following: a $243,000 decrease in payroll expenses related to a decrease in stock compensation expense; a $124,000 decrease in bank service fees; and a $96,000 decrease in professional fees. Offsetting the decrease was a net $37,000 increase in other expenses, with the majority of the increase related to property expenses.

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Advertising expenses

Advertising expenses increased by approximately $1.9 million, or 29%, to approximately $8.6 million for the quarter ended June 30, 2019, from approximately $6.7 million for the quarter ended June 30, 2018. The increase in advertising expenses for the quarter was related to the re-addition of television advertising. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, was $62 for the quarter ended June 30, 2019 compared to $40 for the quarter ended June 30, 2018. Advertising cost of acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising creative, advertising spending, and price competition. Historically, the advertising environment fluctuates due to supply and demand. A more favorable advertising environment may positively impact future new order sales, whereas a less favorable advertising environment may negatively impact future new order sales.

As a percentage of sales, advertising expense was 10.8% and 7.7% for the quarters ended June 30, 2019 and 2018, respectively. The increase in advertising expense as a percentage of total sales for the quarter ended June 30, 2019 can be mainly attributed to the re-addition of television advertising to stimulate sales and promote brand awareness. The Company currently anticipates advertising as a percentage of sales to be approximately 9.0% for fiscal 2020. However, the advertising percentage will fluctuate quarter to quarter due to seasonality and advertising availability.

Depreciation

Depreciation expense increased by approximately $12,000, to approximately $568,000 for the quarter ended June 30, 2019, compared to approximately $556,000 for the quarter ended June 30, 2018. This increase to depreciation expense for the quarter ended June 30, 2019 can be attributed to new property and equipment additions during the quarter.

Other income

Other income increased by approximately $128,000, to approximately $824,000 for the quarter ended June 30, 2019 compared to approximately $696,000 for the quarter ended June 30, 2018. The increase to other income for the quarter ended June 30, 2019 is primarily related to increased interest income due to increased interest rates. Interest income may decrease in the future as the Company utilizes its cash balances on its share repurchase plan, with approximately $28.7 million remaining as of June 30, 2019, on any quarterly dividend payment, or on its operating activities.

Provision for income taxes

For the quarters ended June 30, 2019 and 2018, the Company recorded an income tax provision of approximately $1.6 million and $3.9 million, respectively. The effective tax rate for both of the quarters ended June 30, 2019 and 2018 were approximately 23.5%. The decrease in the income tax provision for the quarter ended June 20, 2019 is related to a decrease in operating income during the quarter. The Company estimates its effective rate will be approximately 24.0% for fiscal 2020.

Liquidity and Capital Resources

The Company’s working capital at June 30, 2019 and March 31, 2019 was $97.0 million and $107.8 million, respectively. The $10.8 million decrease in working capital was primarily attributable to the share buyback and dividends paid in the period. Net cash provided by operating activities was $36,000 and $22.0 million for the three months ended June 30, 2019 and 2018, respectively. This decrease is mainly attributed to a decrease in net income, a much greater increase in inventory for the quarter ended June 30, 2019, compared to the quarter ended June 30, 2018, and an increase in the accounts payable balance for the quarter ended June 30, 2018. Net cash used in investing activities decreased to $192,000 for the three months ended June 30, 2019, compared to $306,000 used in investing activities for the three months ended June 30, 2018. This change in investing activities is related to decreased property and equipment additions acquired in the quarter. Net cash used in financing activities was $17.0 million for the quarter ended June 30, 2019 compared to $5.1 million for the quarter ended June 30, 2018. The increase to financing activities relates to the Company purchasing approximately 613,000 shares of its common stock for approximately $11.5 million during the quarter. The remaining increase to financing activities related to an increase in the dividend paid in the quarter ended June 30, 2019.

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At June 30, 2019, the Company had approximately $28.7 million remaining under the Company’s share repurchase plan. On July 22, 2019 our Board of Directors declared a $0.27 per share dividend. The Board established an August 2, 2019 record date and an August 9, 2019 payment date. Depending on future market conditions the Company may utilize its cash and cash equivalents on the remaining balance of its current share repurchase plan, on quarterly dividends, or on its operating activities.

At June 30, 2019, the Company had no material outstanding lease commitments, other than mentioned in Note 1, Recent Accounting Pronouncements. We are not currently bound by any long or short term agreements for the purchase or lease of capital expenditures. Any material amounts expended for capital expenditures would be the result of an increase in the capacity needed to adequately provide for any increase in our business. To date we have paid for any needed additions to our capital equipment infrastructure from working capital funds and anticipate this being the case in the future. Presently, we have approximately $4.8 million forecasted for capital expenditures for the remainder of fiscal 2020, the majority of which will be invested in our e-commerce platform to better service our customers, which will be funded through cash from operations. The Company’s primary source of working capital is cash from operations. The Company presently has no need for alternative sources of working capital, and has no commitments or plans to obtain additional capital.

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements at June 30, 2019.

Cautionary Statement Regarding Forward-Looking Information

Certain information in this Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by the words "believes," "intends," "expects," "may," "will," "should," "plans," "projects," "contemplates," "intends," "budgets," "predicts," "estimates," "anticipates," or similar expressions. These statements are based on our beliefs, as well as assumptions we have used based upon information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties, and assumptions. Actual future results may differ significantly from the results discussed in the forward-looking statements. A reader, whether investing in our common stock or not, should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. When used in this quarterly report on Form 10-Q, "PetMed Express," "1-800-PetMeds," "PetMeds," "PetMed," "PetMeds.com," “1800PetMeds.com,” "PetMed.com," "PetMed Express.com," "the Company," "we," "our," and "us" refers to PetMed Express, Inc. and our subsidiaries.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk generally represents the risk that losses may occur in the value of financial instruments as a result of movements in interest rates, foreign currency exchange rates, and commodity prices. Our financial instruments include cash and cash equivalents, accounts receivable, and accounts payable. The book values of cash equivalents, accounts receivable, and accounts payable are considered to be representative of fair value because of the short maturity of these instruments. Interest rates affect our return on excess cash and investments. At June 30, 2019, we had $83.4 million in cash and cash equivalents, and the majority of our cash and cash equivalents generate interest income based on prevailing interest rates. A significant change in interest rates would impact the amount of interest income generated from our excess cash and cash equivalents. It would also impact the market value of our cash and cash equivalents. Our cash and cash equivalents are subject to market risk, primarily interest rate and credit risk. Our cash and cash equivalents are managed by a limited number of outside professional managers within investment guidelines set by our Board of Directors. Such guidelines include security type, credit quality, and maturity, and are intended to limit market risk by restricting our cash and cash equivalents to high-quality cash and cash equivalents with both short and long term maturities. We do not hold any derivative financial instruments that could expose us to significant market risk. At June 30, 2019, we had no debt obligations.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company’s management, including our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as

13

amended) as of the quarter ended June 30, 2019, the end of the period covered by this report (the "Evaluation Date"). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective such that the information relating to our Company, including our consolidated subsidiaries, required to be disclosed by the Company in reports that it files or submits under the Exchange Act: (1) is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and (2) 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 were no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

part ii - other information

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations, and trading price of our common stock. Please refer to our Annual Report on Form 10-K for fiscal 2019 for additional information concerning these and other uncertainties that could negatively impact the Company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The Company did not make any sales of unregistered securities during the first quarter of fiscal 2020.

Issuer Purchases of Equity Securities

This table provides information with respect to purchases by the Company of shares of its common stock during the three months ended June 30, 2019:

Month / Year	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program
April 2019 (April 1, 2019 to April 30, 2019)		-	$	-		-	$	40,153,722
May 2019 (May 1, 2019 to May 31, 2019)		607,415	$	18.77		607,415	$	28,755,329
June 2019 (June 1, 2019 to June 30, 2019)		5,632	$	17.52		5,632	$	28,656,678

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

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ITEM 5. OTHER INFORMATION.

On July 26, 2019, the Company entered into an Indemnification Agreement with each of the current directors and executive officers of the Company (collectively, the “Indemnitees”). The Indemnification Agreement clarifies and supplements indemnification provisions already contained in the Company's Bylaws and generally provides that the Company shall indemnify the Indemnitees to the fullest extent permitted by applicable law, subject to certain exceptions, against expenses, judgments, fines and other amounts actually and reasonably incurred in connection with their service as a director or officer and also provide for rights to advancement of expenses and contribution. The form of the Indemnification Agreement document can be found at Exhibit 10.1, filed herewith.

On July 26, 2019, the Company’s Board of Directors ("Board"), reviewed and approved the following change to its compensation arrangements with the Company’s Chairman of the Board:

The Board approved a $15,000 increase in the annual retainer provided to the Company’s Chairman of the Board, currently, Robert C. Schweitzer, for a total annual amount of $55,000. This increase in the annual retainer for the Chairman of the Board is due to the additional responsibilities inherent to the role of Chairman of the Board.  There were no other changes to the annual retainers paid to non-employee directors, namely: $40,000 and 7,500 shares of restricted stock. Aside from such cash and restricted stock compensation, non-employee directors also are reimbursed for their expenses incurred in attending Board and committee meetings. There are no fees based upon number of meetings attended or for each Board committee on which they serve.

On July 26, 2019 the Board also adopted a written related party transaction policy which covers transactions or series of transactions in which the Company or any subsidiary participates and a “Related Party” (as defined in the policy) has or will have a direct or indirect material interest. The “Related Party Transaction Policies and Procedures”, which supplements the provisions in the Company’s Code of Business Conduct and Ethics concerning potential conflict of interest situations, can be found at Exhibit 99.1, filed herewith.

ITEM 6. EXHIBITS

The following exhibits are filed as part of this report.

10.1 Form of Indemnification Agreement entered into with the Directors and Executive Officers of the Company.*

31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities Exchange Act of 1934, as amended (filed herewith to Exhibit 31.1 of the Registrant’s Report on Form 10-Q for the quarter ended June 30, 2019, Commission File No. 000-28827).*

31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities Exchange Act of 1934, as amended (filed herewith to Exhibit 31.2 of the Registrant’s Report on Form 10-Q for the quarter ended June 30, 2019, Commission File No. 000-28827).*

32.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith to Exhibit 32.1 of the Registrant’s Report on Form 10-Q for the quarter ended June 30, 2019, Commission File No. 000-28827).*

99.1 Related Party Transactions Policy of the Company.*

101.INS** XBRL Instance

101.SCH** XBRL Taxonomy Extension Schema

101.CAL** XBRL Taxonomy Extension Calculation

101.DEF** XBRL Taxonomy Extension Definition

101.LAB** XBRL Taxonomy Extension Labels

101.PRE*** XBRL Taxonomy Extension Presentation

* Filed herewith

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

15

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.

PETMED EXPRESS, INC.

      (The “Registrant”)

Date: July 30, 2019

By:   /s/ Menderes Akdag                           

       Menderes Akdag

Chief  Executive Officer and President

(principal executive officer)

By:   /s/ Bruce S. Rosenbloom

       Bruce S. Rosenbloom

Chief Financial Officer

(principal financial and accounting officer)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

PETMED EXPRESS, INC

_______________________

FORM 10-Q

FOR THE QUARTER ENDED:

JUNE 30, 2019

_______________________

EXHIBITS

_______________________

EX-10.1

Exhibit 10.1

INDEMNIFICATION AGREEMENT

     THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered into this __ day of ____________, 20__, by and between ____________________________ (the "Indemnified Party") and PetMed Express, Inc., a Florida corporation (the "Corporation").

W I T N E S S E T H:

WHEREAS, it is essential to the Corporation to retain and attract as directors and officers the most capable persons available; and

WHEREAS, the substantial increase in corporate litigation subjects directors and officers to expensive litigation risks at the same time that the availability of directors' and officers' liability insurance is limited; and

WHEREAS, in addition, the indemnification provisions of the Florida Business Corporation Act (the "FBCA," as further defined below) expressly provide that such provisions are non-exclusive; and

WHEREAS, the Indemnified Party does not regard the protection available under the Articles of Incorporation and Bylaws of the Corporation and insurance, if any, as adequate in the present circumstances, and considers it a necessary condition to the Indemnified Party's agreement to serve as a director and/or officer of the Corporation to have adequate protection and appropriate contractual rights to indemnification from the Corporation, and the Corporation desires the Indemnified Party to serve in such capacity or capacities and to have such protection and rights as set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained in this Agreement, it is hereby agreed as follows:

1. Definitions. For the purposes of this Agreement, the terms below shall have the indicated meanings except where the context in which such a term is used in this Agreement clearly indicates otherwise:

(a) Affiliate means, as to any Person (the "first Person"), any other Person that, either directly or indirectly, controls, is controlled by or is under common control with the first Person; and the term "control" (including in correlative meaning, the terms "controlled by" and "under common control with"), as used with respect to any first Person, means the possession by any other Person, either directly or indirectly, of the power to direct, or to cause the direction of, the management and policies of the first Person, whether through the ownership of voting securities, by contract or otherwise.

(b) Associate means, as to any Person, a director, officer, employee, agent, consultant, independent contractor, stockholder or partner of such Person.

(c) Board means the Board of Directors of the Corporation.

(d) Evaluation Date means, as to any Indemnification Notice, the date that is thirty (30) calendar days after the date of receipt by the Board of such Indemnification Notice.

(e) Expenses means any and all costs or expenses (other than Liabilities), including but not limited to Legal Fees, and including interest on any of the foregoing, actually and reasonably paid or incurred by the Indemnified Party on account of or in connection with any Proceeding; and Expense means any one of the Expenses.

(f) Expense Advance Request means the request provided for by Section 2(b)(iv) of this Agreement.

(g) FBCA means the Florida Business Corporation Act, Chapter 607, Florida Statutes, and any successor statute.

(h) Final Judicial Determination means a determination by a Court of competent jurisdiction as to which all rights of appeal therefrom have been exhausted or have lapsed.

(i) Hold Harmless Agreement means the agreement provided for by Section 2(c)(i) of this Agreement.

(j) Indemnification Notice means the notice provided for by Section 2(b) of this Agreement.

Page 1 of 9 Exhibit 10.1

(k) Legal Fees means the fees and disbursements of legal counsel, legal assistants, experts, accountants, consultants and investigators, before and at trial, in appellate or bankruptcy proceedings and otherwise actually and reasonably paid or incurred by the Indemnified Party on account of or in connection with any Proceeding.

(l) Liabilities means any and all liabilities of every type whatsoever (other than an Expense), including, but not limited to, judgments, assessments, fines, penalties, excise or other taxes and amounts paid in settlement, and including interest on any of the foregoing, actually and reasonably paid, incurred or suffered by the Indemnified Party on account of or in connection with any Proceeding; and Liability means any one of the Liabilities.

(m) Non-indemnifiable Conduct means any act or omission to act of the Indemnified Party material to a Proceeding as to which indemnification is sought under this Agreement, which act or omission to act is not subject to indemnification by the Corporation under the provisions of Section 607.0850, Florida Statutes, or any other then-applicable law.

(n) Person means any natural person or individual, or any artificial person, including any corporation, association, unincorporated organization, partnership, joint venture, firm, company, business, trust, business trust, limited liability company, government, public body or authority, governmental agency or department, and any other entity.

(o) Plan means any employee benefit or welfare benefit plan sponsored by the Corporation or any of its Affiliates.

(p) Proceeding means any threatened, pending or completed claim, demand, inquiry, investigation, action, suit or proceeding, regarding any matter (including but not limited to matters arising under or relating to federal or state securities laws, laws relating to the protection of the environment, the Employee Retirement Income Security Act of 1974 ("ERISA") or other laws for the benefit or protection of employees, federal or state tax laws, laws relating to discrimination against persons or groups, or any other civil or criminal law), whether formal or informal, or whether brought by or in the right of the Corporation, whether brought by a governmental body, agency or representative or by any other Person, and whether of a civil, criminal, administrative or investigative nature, and includes any Third Party Proceeding.

(q) Third Party Proceeding means any Proceeding against the Indemnified Party by, or any Proceeding by the Indemnified Party against, any third party.

2. Indemnification Generally.

(a) Extent of Indemnity.

(i) Grant of Indemnity. The Corporation shall indemnify the Indemnified Party to the fullest extent permitted by applicable law in effect on the date hereof as such law may from time to time be amended (but, in the case of any such amendment, only to the extent such amendment permits the Corporation to provide broader indemnification rights and protection than the law permitted the Corporation to provide before such amendment). Without in any manner limiting the generality of the immediately preceding sentence, but subject to and upon the terms and conditions of this Agreement, the Corporation shall indemnify and hold harmless the Indemnified Party in respect of:

(1) any and all Liabilities that may be incurred or suffered by the Indemnified Party as a result of or arising out of prosecuting, defending, settling, investigating or being a witness in any Proceeding in which the Indemnified Party may be or may have been involved as a party or otherwise, arising out of the fact that the Indemnified Party is or was an Associate of the Corporation or any of its Affiliates, or serves or served as an Associate in or for any Person at the request of the Corporation (including without limitation service as a trustee or in any other fiduciary or similar capacity for or in connection with any Plan maintained by the Corporation or any of its Affiliates or for the benefit of any of the employees of the Corporation or any of its Affiliates, or service on any trade association, civic, religious, educational or charitable boards or committees);

(2) any and all Liabilities that may be incurred or suffered by the Indemnified Party as a result of or arising out of or in connection with any attempt (regardless of its success) by any Person to charge or cause the Indemnified Party to be charged with wrongdoing or with financial responsibility for damages arising out of or incurred in connection with the matters indemnified against in this Agreement; and

(3) any and all Expenses that may be incurred or suffered by the Indemnified Party as a result of or arising out of, incident to or in connection with any of the matters indemnified against in this Agreement.

Page 2 of 9 Exhibit 10.1

(ii) Coordination With Insurance. The obligations of the Corporation under this Agreement are not conditioned in any way on any attempt, whether or not successful, by the Indemnified Party or by the Corporation to collect from an insurer any amount under any insurance policy.

(iii) Limitations. In no case shall any indemnification or advancement or payment of Expenses be provided under this Agreement to or on behalf of or for the direct or indirect benefit of the Indemnified Party by the Corporation:

(1) In any Proceeding brought by or in the name or interest of the Indemnified Party against the Corporation, except as set forth in Section 6(e) of this Agreement;

(2) In any Proceeding brought by the Corporation against the Indemnified Party, which action is initiated at the direction of the Board, except as set forth in Section 6(e) of this Agreement; or

(3) for any Non-indemnifiable Conduct, but no limitation contained in this Section 2(a)(iii)(3) shall prohibit or otherwise restrict, or provide the Corporation with a basis to withhold payments with respect to, the indemnification of the Indemnified Party (subject to the repayment provisions of Section 2(g) of this Agreement) unless and until a determination is made pursuant to the provisions of this Agreement that the Indemnified Party's actions or omissions to act constitute such Non-indemnifiable Conduct.

(b) Claims for Indemnification.

(i) Submission of Claims. Whenever any claims shall arise for indemnification under this Agreement, the Indemnified Party shall notify the Corporation as promptly as reasonably practicable after the Indemnified Party has actual knowledge of the facts constituting the basis for such claim (an "Indemnification Notice"). The Indemnification Notice shall specify in reasonable detail the facts known to the Indemnified Party giving rise to such indemnification right, the positions and allegations of the parties to any related Proceeding and the factual bases therefor, and the amount or an estimate of the amount of Liabilities and Expenses reasonably expected to arise therefrom (or a statement to the effect that such Liabilities and Expenses cannot be reasonably estimated). A delay by the Indemnified Party in providing such notice shall not relieve the Corporation from its obligations under this Agreement unless and then only to the extent that the Corporation is materially and adversely affected by the delay. If the Indemnified Party desires to personally retain the services of an attorney in connection with any Proceeding, the Indemnified Party shall notify the Corporation of such desire in the Indemnification Notice relating thereto, and such notice shall identify the counsel to be retained.

(ii) Presumption of Right to Indemnification. Upon submission of an Indemnification Notice to the Corporation, the Board shall review such Indemnification Notice and endeavor to determine whether the Indemnified Party is entitled to indemnification under this Agreement with respect to the matters described therein. As of the Evaluation Date, unless the Board has reasonably determined that the Indemnified Party is not entitled to indemnification under this Agreement with respect to the matters described in such Indemnification Notice, there shall be created a presumption that the Indemnified Party is entitled to such indemnification. Such presumption shall continue, and indemnification shall be provided under this Agreement, unless and until such time as the Board shall reasonably determine that the Indemnified Party is not entitled to indemnification under this Agreement. This paragraph is procedural only and shall not affect the right of the Indemnified Party to indemnification under this Agreement. Any determination by the Board that the Indemnified Party is not entitled to indemnification under this Agreement and any failure to make any advancements or payments requested in an Indemnification Notice or otherwise shall be subject to judicial review.

(iii) Limitation on Adverse Determinations by the Board. Subject to applicable law, no determination by the Board that the Indemnified Party is not entitled to indemnification under this Agreement shall be given effect under this Agreement unless (i) such determination is made in good faith and is based upon clear and convincing evidence, (ii) such determination is made by a vote of a majority of the Corporation's directors at a meeting at which a quorum is present, and (iii) the Indemnified Party is given written notice of such meeting at least 10 days in advance of such meeting and is given a meaningful opportunity to present at such meeting information in support of the claim for indemnification.

(iv) Expenses.

(1) With respect to any Proceeding as to which the Indemnified Party is entitled (or is presumed to be entitled) to indemnification under this Agreement, Expenses incurred or required to be incurred by or on behalf of the Indemnified Party in connection with such Proceeding, but prior to the final disposition of such Proceeding, shall be advanced or paid or caused to be advanced or paid by the Corporation to or on behalf of the Indemnified Party notwithstanding that there has been no final disposition of such Proceeding, to the extent provided in the immediately following paragraph.

Page 3 of 9 Exhibit 10.1

(2) For purposes of determining whether to authorize advancement or payment of Expenses pursuant to the immediately preceding paragraph, the Indemnified Party shall from time to time submit to the Board a statement requesting advancement of Expenses (an "Expense Advance Request"). Each Expense Advance Request shall set forth (i) in reasonable detail, all Expenses already incurred or required to be incurred by the Indemnified Party and the reason therefor, and (ii) an undertaking by the Indemnified Party, in form and substance reasonably satisfactory to the Corporation, to repay all of the Expenses advanced or paid by the Corporation if it shall ultimately be determined that the Indemnified Party is not entitled to be indemnified with respect to such Proceeding by the Corporation under this Agreement or otherwise. Upon receipt of an Expense Advance Request satisfying the foregoing requirements, as to each Expense set forth therein, unless the Board reasonably determines that the Indemnified Party is not entitled to advancement or payment of such Expense, the Corporation shall, within 10 business days thereafter (or, if later as to any Expense yet to be incurred by the Indemnified Party, on or before the date that is three business days prior to the date such Expense is required to be paid by the Indemnified Party), pay or cause to be paid by the Corporation the amount of such Expense to or on behalf of the Indemnified Party. No security shall be required in connection with any Expense Advance Request, and the ability or inability of the Indemnified Party to make repayment shall not be considered in any evaluation of an Expense Advance Request.

(c) Rights to Defend or Settle; Third Party Proceedings, etc.

(i) Corporation's Right to Defend or Settle. If, at any time, the Corporation shall provide the Indemnified Party with an agreement in writing, in form and substance reasonably satisfactory to the Indemnified Party and the Indemnified Party's counsel, agreeing to indemnify, defend or prosecute and hold the Indemnified Party harmless from all Liabilities and Expenses arising from any Third Party Proceeding (a "Hold Harmless Agreement"), and demonstrating to the reasonable satisfaction of the Indemnified Party the Corporation's financial ability to accomplish such indemnification, the Corporation may thereafter at its own expense undertake full responsibility for the defense or prosecution of such Third Party Proceeding. The Corporation may contest or settle any such Third Party Proceeding for money damages on such terms and conditions as it deems appropriate but shall be obligated to consult in good faith with the Indemnified Party and not to contest or settle any Third Party Proceeding involving injunctive or equitable relief against or affecting the Indemnified Party or the Indemnified Party's properties or assets without the prior written consent of the Indemnified Party, such consent not to be withheld unreasonably. The Indemnified Party may participate at the Indemnified Party's own expense and with the Indemnified Party's own counsel in the defense or prosecution of a Third Party Proceeding controlled by the Corporation. Such participation shall not relieve the Corporation of its obligation to indemnify the Indemnified Party under this Agreement with respect to such Third Party Proceeding.

(ii) Indemnified Party's Rights to Settle or Defend. If the Corporation fails to deliver a reasonably satisfactory Hold Harmless Agreement and evidence of financial ability as contemplated by the preceding paragraph within 10 days after receipt by the Board of an Indemnification Notice, the Indemnified Party may contest or settle the Third Party Proceeding on such terms as the Indemnified Party sees fit but shall not reach a settlement with respect to the payment of money damages without consulting in good faith with the Corporation. The Corporation may participate at its own expense and with its own counsel in defense or prosecution of a Third Party Proceeding pursuant to this Section 2(c)(ii), but any such participation shall not relieve the Corporation of its obligations to indemnify the Indemnified Party under this Agreement. As to any Third Party Proceeding as to which the Indemnified Party is entitled (or is presumed to be entitled) to indemnification under this Agreement, unless and until such time as the Corporation at its own expense undertakes full responsibility for and control of the defense or prosecution of such Third Party Proceeding, the Indemnified Party shall be entitled to indemnification under this Agreement with respect any Expenses of the Indemnified Party, including Legal Fees, relating to such Third Party Proceeding. Notwithstanding the foregoing, the Corporation may at any time deliver to the Indemnified Party a reasonably satisfactory Agreement of Indemnity and evidence of financial ability as contemplated by the preceding paragraph, and thereafter at its own expense undertake full responsibility for and control of the defense or prosecution of such Third Party Proceeding.

(iii) Expenses as to Third Party Proceeding. All Expenses incurred in defending or prosecuting any Third Party Proceeding shall be advanced or paid in accordance with the procedure set forth in Section 2(b)(iv) of this Agreement.

(iv) Addressing Liens, Attachments, Etc. If by reason of any Third Party Proceeding as to which the Indemnified Party is entitled (or is presumed to be entitled) to indemnification under this Agreement, a lien, attachment, garnishment or execution is placed upon any of the property or assets of the Indemnified Party, the Corporation shall promptly furnish a reasonably satisfactory indemnity bond to obtain the prompt release of such lien, attachment, garnishment or execution.

Page 4 of 9 Exhibit 10.1

 (v) Cooperation. The Indemnified Party shall cooperate in the prosecution or defense of any Third Party Proceeding that is controlled by the Corporation, but the Indemnified Party shall continue to be entitled to advancement or payment of Expenses incurred by him or her in connection therewith as provided in this Agreement.

     (d) Powers of Attorney; Access to Records. The parties to this Agreement shall execute such powers of attorney as may be necessary or appropriate to permit participation of counsel selected by any party hereto and, as may be reasonably related to any such proceeding, shall provide to the counsel, accountants and other representatives of each party access during normal business hours to all properties, personnel, books, records, contracts, commitments and all other business records of such other party and will furnish to such other party copies of all such documents as may be reasonably requested (certified, if requested).

     (e) Choice of Counsel. In all matters as to which indemnification is or may be available to the Indemnified Party under this Agreement, the Indemnified Party shall be free to choose and retain counsel, provided that the Indemnified Party shall secure the prior written consent of the Corporation as to such selection, which consent shall not be unreasonably withheld.

     (f) Consultation. If the Indemnified Party desires to retain the services of an attorney prior to the determination by the Corporation as to whether it will undertake the defense or prosecution of the Third Party Proceeding as provided in Section 2(c) of this Agreement, the Indemnified Party shall notify the Corporation of such desire in the Indemnification Notice delivered pursuant to Section 2(b)(i), and such Indemnification Notice shall identify the counsel to be retained. The Corporation shall then have 10 days within which to advise the Indemnified Party whether it will assume the defense or prosecution of the Third Party Proceeding in accordance with Section 2(c)(i) hereof. If the Indemnified Party does not receive an affirmative response within such ten-day period, he or she shall be free to retain counsel of his or her choice, and the indemnity provided in Section 2(a) shall apply to the Expenses incurred by the Indemnified Party after the expiration of such 10-day period. Expenses incurred by the Indemnified Party prior to the expiration of such 10-day period shall be covered by the indemnity of Section 2(a), to the extent that representation prior to the expiration of the 10-day period is determined by the Board to be necessary to protect any material interests of the Indemnified Party.

     (g) Repayment. Notwithstanding the other provisions of this Agreement to the contrary, if the Corporation has paid or advanced any Liabilities or Expenses under this Agreement (including pursuant to an Expense Advance Request) to, on behalf of or for the benefit of the Indemnified Party and if it is determined, by a Final Judicial Determination, that the Indemnified Party's actions or omissions to act constituted Non-indemnifiable Conduct or that the Indemnified Party otherwise is not or was not entitled to such payment or advance or that the Indemnified Party is required to reimburse or repay the Corporation for the amount thereof, the Indemnified Party shall and does hereby undertake in such circumstances to reimburse the Corporation for any and all such amounts previously paid to or for the benefit of the Indemnified Party. Such reimbursement shall be without interest, except that interest calculated as provided in Section 5(e)(ii) shall begin to accrue 20 days after the date of the Final Judicial Determination.

3. Representations and Agreements of the Corporation.

(a) Authority. The Corporation represents, covenants and agrees that it has the corporate power and authority to enter into this Agreement and to carry out its obligations under this Agreement. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly authorized by the Board. This Agreement is a valid and binding obligation of the Corporation and is enforceable against the Corporation in accordance with its terms.

(b) Non-contestability. The Corporation represents, covenants and agrees that it will not initiate, and that it will use its best efforts to cause any of its Affiliates not to initiate, any action, suit or proceeding challenging the validity or enforceability of this Agreement.

4. Good Faith Judgment. The Corporation represents, covenants and agrees that it will exercise good faith judgment in determining the entitlement of the Indemnified Party to indemnification under this Agreement.

5. Relationship of this Agreement to Other Indemnities.

(a) Non-exclusivity.

Page 5 of 9 Exhibit 10.1

(i) This Agreement and all rights granted to the Indemnified Party under this Agreement are in addition to and shall not be deemed to be exclusive with or of any other rights that may be available to the Indemnified Party under any Articles of Incorporation, bylaw, statute, agreement, or otherwise. To the extent that any change to applicable law (whether by statute or judicial decision) shall permit any broader indemnification by agreement than would be afforded under the provisions of this Agreement, it is the intent of the parties to this Agreement that the Indemnified Party shall enjoy by this Agreement the broader rights and protection so afforded by such change.

(ii) The rights, duties and obligations of the Corporation and the Indemnified Party under this Agreement do not limit, diminish or supersede the rights, duties and obligations of the Corporation and the Indemnified Party with respect to the indemnification afforded to the Indemnified Party under any liability insurance, the FBCA, or under the bylaws or the Articles of Incorporation of the Corporation. In addition, the Indemnified Party's rights under this Agreement will not be limited or diminished in any respect by any amendment to the bylaws or the Articles of Incorporation of the Corporation.

(b) Availability, Contribution, Subrogation, Etc.

(i) The availability or non-availability of indemnification by way of any insurance policy, Articles of Incorporation, bylaw, vote of stockholders, or otherwise from the Corporation to the Indemnified Party shall not affect the right of the Indemnified Party to indemnification under this Agreement, provided that all rights under this Agreement shall be subject to applicable statutory provisions in effect from time to time, except as otherwise expressly provided by this Agreement.

(ii) Notwithstanding any contrary provisions contained in this Agreement, any funds received by the Indemnified Party by way of indemnification or payment from any source other than from the Corporation under this Agreement shall reduce any amount otherwise payable to the Indemnified Party under this Agreement.

(iii) If the Indemnified Party is entitled under any provision of this Agreement to indemnification by the Corporation for some claims, issues or matters, but not as to other claims, issues or matters, or for some or a portion of Liabilities or the Expenses actually and reasonably incurred by him or her or amounts actually and reasonably paid in settlement by him or her in the investigation, defense, appeal or settlement of any matter for which indemnification is sought under this Agreement, but not for the total amount thereof, the Corporation shall indemnify the Indemnified Party for the portion of such claims, issues or matters, or the portion of such Liabilities or Expenses to which the Indemnified Party is entitled.

(iv) If for any reason it is determined by a court of competent jurisdiction, in a decision which neither party to this Agreement properly appeals or which decision is affirmed on appeal, that the indemnity provided under this Agreement is unavailable, or if for any reason the indemnity under this Agreement is insufficient to hold the Indemnified Party harmless as provided in this Agreement, then, in any such event, the Corporation shall contribute to the amounts paid or payable by the Indemnified Party in such proportion as equitably reflects the relative benefits received by, and fault of, the Indemnified Party and the Corporation and its Affiliates and its and their respective Associates.

6. Miscellaneous.

(a) All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy, electronic telephone line facsimile transmission or other similar electronic or digital transmission method; the day after it is sent, if sent by recognized overnight delivery service with all fees payable by the sender; and five days after it is sent, if mailed, first class mail, postage prepaid. In each case notice shall be sent to::

 If to the Indemnified Party:

            the Indemnified Party's address on file with the Corporation

 If to the Corporation:

            the Corporation's principal executive offices, Attention Chief Executive Officer to such other address as either party may have specified in writing to the other using the procedures specified above in this Section 6(a).

Page 6 of 9 Exhibit 10.1

     (b) Governing Law. This Agreement shall be construed pursuant to and governed by the substantive laws of the State of Florida (but any provision of Florida law shall not apply if the application of such provision would result in the application of the law of a state or jurisdiction other than Florida).

     (c) Severability. Any provision of this Agreement that is determined by a court of competent jurisdiction to be prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. In any such case, such determination shall not affect any other provision of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect. If any provision or term of this Agreement is susceptible to two or more constructions or interpretations, one or more of which would render the provision or term void or unenforceable, the parties agree that a construction or interpretation which renders the term or provision valid shall be favored.

(d) Specific Enforcement; Presumption.

(i) The parties agree and acknowledge that in the event of a breach by the Corporation of its obligations under this Agreement, or a breach of any other material provision of this Agreement, damages at law will be an insufficient remedy to the Indemnified Party. Accordingly, the parties agree that, in addition to any other remedies or rights that may be available to the Indemnified Party, the Indemnified Party shall also be entitled, upon application to a court of competent jurisdiction, to obtain temporary or permanent injunctions to compel specific performance of the obligations of the Corporation under this Agreement.

(ii) There shall exist in any action to enforce the rights of the Indemnified Party under this Agreement a rebuttable presumption that the Indemnified Party is entitled to indemnification under this Agreement, and the burden of proving that the Indemnified Party is not entitled to indemnification under this Agreement shall be on the Corporation. Neither the failure of the Corporation (through the Board or independent legal counsel), prior to the commencement of such action, to have made a determination that the Indemnified Party is entitled to indemnification under this Agreement, nor an actual determination by the Corporation (through the Board or independent legal counsel) that the Indemnified Party is not entitled to indemnification under this Agreement, shall (X) constitute a defense to the action, (Y) create a presumption that the Indemnified Party is not entitled to indemnification under this Agreement, or (Z) otherwise alter the presumption in favor of the Indemnified Party referred to in the immediately preceding sentence.

(e) Cost of Enforcement; Interest.

(i) If the Indemnified Party engages the services of an attorney or any other third party or in any way initiates legal action to enforce his rights under this Agreement, including but not limited to the collection of monies due from the Corporation to the Indemnified Party, the prevailing party shall be entitled to recover all reasonable costs and expenses (including reasonable attorneys' fees before and at trial, in appellate proceedings and otherwise). Should the Indemnified Party prevail, such costs and expenses shall be in addition to monies otherwise due the Indemnified Party under this Agreement.

(ii) If any monies shall be due the Indemnified Party from the Corporation under this Agreement (including under an Expense Advance Request) and shall not be paid within 30 days from the date of written request for payment, interest shall accrue on such unpaid amount at the rate of 2% per annum in excess of the prime rate announced from time to time by Citibank, New York, New York, or such lower rate as may be required to comply with applicable law from the date when due until it is paid in full.

     (f) No Assignment. Any claim, right, title, benefit, remedy or interest of the Indemnified Party in, to or under or arising out of or in connection with this Agreement is personal and may not be sold, assigned, transferred, pledged or hypothecated, but the provisions of this Agreement shall survive the death, disability or incapacity of the Indemnified Party or the termination of the Indemnified Party's services as a director or officer of the Corporation, or in any other capacity as to which indemnification is available under this Agreement, and shall inure to the benefit of the Indemnified Party's heirs, devisees, executors, administrators and other legal representatives. This Agreement shall inure to the benefit of and shall be binding upon the successors in interest and assigns of the Corporation, including any successor corporation resulting from a merger, consolidation, recapitalization, reorganization, sale of all or substantially all of the assets of the Corporation, or any other transaction resulting in the successor corporation assuming the liabilities of the Corporation under this Agreement (by operation of law or otherwise).

Page 7 of 9 Exhibit 10.1

(g) No Third Party Beneficiaries. This Agreement is not intended to benefit, and has not been entered into for the benefit of, any third parties and, other than as set forth in the preceding paragraph as to heirs, devisees, assignees, executors, administrators, other legal representatives and successors, nothing in this Agreement, whether express or implied, is intended or should be construed to confer upon, or to grant to, any Person, except the Corporation and the Indemnified Party, any claim, right, benefit or remedy under or because of this Agreement or any provision set forth in this Agreement.

(h) Construction. As used in this Agreement, (1) the word "including" is always without limitation; and (2) the words in the singular number include words of the plural number and vice versa; and the use of any gender shall include all genders where the context so permits.

(i) Further Assurances. The parties to this Agreement shall execute and deliver, or cause to be executed and delivered, such additional or further documents, agreements or instruments and shall cooperate with one another in all respects for the purpose of carrying out the intent of the parties as expressed in this Agreement.

(j) Venue; Process. The parties to this Agreement agree that jurisdiction and venue in any action brought pursuant to this Agreement to enforce its terms or otherwise with respect to the relationships between the parties shall properly lie in the Circuit Court of the State of Florida in and for Palm Beach County, or in the United States District Court for the Southern District of Florida. Such jurisdiction and venue are merely permissive; jurisdiction and venue shall also continue to lie in any court where jurisdiction and venue would otherwise be proper. The parties agree that they will not object that any action commenced in the foregoing jurisdictions is commenced in a forum non conveniens. The parties further agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without the necessity for service by any other means provided by statute or rule of court.

(k) Waiver and Delay. Any term or provision of this Agreement may be waived at any time by the party entitled to the benefit of such waived term or provision by an instrument in writing duly executed by or on behalf of the party entitled to the benefit of such waived term or provision. No waiver by any party to this Agreement of any term or provision of this Agreement shall operate or be construed as a waiver of any other term or provision of this Agreement, whether or not similar. No delay on the part of any party in exercising any right, power or privilege under this Agreement shall operate as a waiver of any such right, power or privilege.

(l) Construction. Each party to this Agreement severally acknowledges and confirms that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be utilized in the interpretation or construction of this Agreement.

(m) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be considered an original, but all of which together shall constitute one and the same instrument.

Page 8 of 9 Exhibit 10.1

(n) Headings. The headings of the various sections in this Agreement are inserted for the convenience of the parties and shall not affect the meaning, construction or interpretation of this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.

PETMED EXPRESS, INC.

By:________________________________

Name:______________________________

Title: ______________________________

INDEMNIFIED PARTY:

_______________________________________

(Signature)

_______________________________________

(Print Name)

Page 9 of 9 Exhibit 10.1

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Menderes Akdag, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended June 30, 2019 of PetMed Express, Inc.;

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 officers 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 control 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;

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 officers and I have disclosed, based on our most recent evaluation of the 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.

July 30, 2019

By: /s/ Menderes Akdag

Menderes Akdag

Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bruce S. Rosenbloom, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended June 30, 2019 of PetMed Express, Inc.;

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 officers 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 control 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;

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 officers and I have disclosed, based on our most recent evaluation of the 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.

July 30, 2019

By: /s/ Bruce S. Rosenbloom

Bruce S. Rosenbloom

Chief Financial Officer

EX-32.1

 Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Menderes Akdag, and I, Bruce S. Rosenbloom, each certify to the best of our knowledge, based upon a review of the report on Form 10-Q for the quarter ended June 30, 2019 (the “Report”) of the Registrant, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report, fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: July 30, 2019
By:	/s/ Menderes Akdag
Menderes Akdag Chief Executive Officer and President
By:	/s/ Bruce S. Rosenbloom
Bruce S. Rosenbloom Chief Financial Officer

EX-99.1

Exhibit 99.1

PETMED EXPRESS, INC.

RELATED PARTY TRANSACTION POLICIES AND PROCEDURES

POLICY

It is the policy of the Board of Directors (the “Board”) of PetMed Express, Inc. (the “Company”) that all Related Party Transactions, as that term is defined in this policy, shall be subject to review in accordance with the procedures set forth below. The Board has determined that the Audit Committee (the “Committee”) is best suited to review all Related Party Transactions.

PROCEDURES

The Committee shall review the material facts of all Related Party Transactions and may also approve or disapprove of the entry into the Related Party Transaction, subject to the exceptions described below. Where advance Committee review of a Related Party Transaction is not feasible or has otherwise not been obtained, then the Related Party Transaction shall be reviewed subsequently by the Committee (and such transaction may be ratified subsequently by the Committee). The Committee may also disapprove of a previously entered into Related Party Transaction and may require that management of the Company take all reasonable efforts to terminate, unwind, cancel or annul the Related Party Transaction. In connection with its review of a Related Party Transaction, the Committee will take into account, among other factors it deems appropriate, whether the Related Party Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the Related Party’s interest in the Related Party Transaction.

Management shall present to the Audit Committee the following information, to the extent relevant, with respect to actual or potential Related Party Transactions:

1. A general description of the transaction(s), including the material terms and conditions.

2. The name of the Related Party and the basis on which such person or entity is a Related Party.

3. The Related Party’s interest in the transaction(s), including the Related Party’s position or relationship with, or ownership of, any entity that is a party to or has an interest in the transaction(s).

4. The approximate dollar value of the transaction(s), and the approximate dollar value of the Related Party’s interest in the transaction(s) without regard to amount of profit or loss.

5. In the case of a lease or other transaction providing for periodic payments or installments, the aggregate amount of all periodic payments or installments expected to be made.

6. In the case of indebtedness, the aggregate amount of principal to be outstanding and the rate or amount of interest to be payable on such indebtedness.

7. Any other material information regarding the transaction(s) or the Related Party’s interest in the transaction(s).

The Committee shall be authorized to review in advance and provide standing pre-approval in advance for certain Related Party Transactions or categories of Related Party Transactions. The Committee has reviewed the Related Party Transactions described below in “Standing Pre-Approval for Certain Related Party Transactions” and determined that each of the Related Party Transactions described therein shall be deemed to have been reviewed and approved in advance by the Committee under the terms of this Policy.

Each director who is a Related Party with respect to a particular Related Party Transaction shall disclose all material information to the Committee concerning such Related Party Transaction and his or her interest in such transaction. The Audit Committee or the Board of Directors may recommend the creation of a special committee to review any Related Party Transaction.

If a Related Party Transaction will be ongoing, the Committee may establish guidelines for the Company’s management to follow in its ongoing dealings with the Related Party. Thereafter, the Committee shall periodically review and assess ongoing relationships with the Related Party. Any material amendment, renewal or extension of a transaction, arrangement or relationship previously reviewed under this Policy shall also be subject to subsequent review under this Policy.

Page 1 of 3 Exhibit 99.1

This Policy is intended to augment and work in conjunction with other Company policies having any code of conduct, code of ethics and/or conflict of interest provisions.

The Audit Committee periodically shall review this Policy and may recommend amendments to this Policy from time to time as it deems appropriate. In addition to guidelines for ongoing Related Party Transactions, the Audit Committee may, as it deems appropriate and reasonable, establish from time to time guidelines regarding the review of other Related Party Transactions including those that (i) involve de minimis amounts, (ii) do not require public disclosure, or (iii) involve transactions that have primarily a charitable purpose.

DEFINITIONS

A “Related Party Transaction” is any financial transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which:

(a) the aggregate amount involved will or may be expected to exceed $120,000 since the beginning of the Company’s last completed fiscal year,

(b) the Company or any of its subsidiaries is a participant, and

(c) any Related Party has or will have a direct or indirect interest.

A “Related Party” is any:

(a) person who is or was (since the beginning of the last fiscal year for which the Company has filed a Form 10-K and proxy statement, even if they do not presently serve in that role) an executive officer, director or nominee for election as a director,

(b) greater than 5% beneficial owner of the Company’s common stock, or

(c) Immediate Family Member of any of the foregoing. An “Immediate Family Member” includes a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons and daughters-in-law, and brothers- and sisters-in-law and anyone residing in such person’s home (other than a tenant or employee).

STANDING PRE-APPROVAL FOR CERTAIN RELATED PARTY TRANSACTIONS

The Committee has reviewed the types of Related Party Transactions described below and determined that each of the following Related Party Transactions shall be deemed to have been reviewed in advance and pre-approved by the Committee, even if the aggregate amount involved will exceed $120,000.

1. Employment of executive officers. Any employment by the Company of, or compensation of, an executive officer of the Company if (i) the executive officer is not an immediate family member of another executive officer or director of the Company, (ii) the executive officer was not otherwise a Related Party of the Company prior to becoming an employee of the Company and (iii) the Company’s Compensation Committee has approved (or recommended that the Board approve) the compensation of such executive officer.

2. Director compensation. Any compensation paid to a director if the compensation is required to be reported in the Company’s proxy statement under Item 402 of Regulation S-K.

3. Certain transactions with other companies. Any transactions, arrangements or relationships with another company at which a Related Party’s only relationship is as a director and/or beneficial owner of less than 10% of that company’s equity interests.

4. Transactions where all shareholders receive proportional benefits. Any transactions, arrangements or relationships where the Related Party’s interest arises solely from the ownership of the Company’s common stock and all holders of the Company’s common stock received the same benefit on a pro rata basis (e.g., dividends or stock splits).

5. Regulated transactions. Any transactions, arrangements or relationships with a Related Party involving the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority.

Page 2 of 3 Exhibit 99.1

6. Certain banking-related services. Any transactions, arrangements or relationships with a Related Party involving services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services.

DISCLOSURE

All Related Party Transactions that are required to be disclosed in the Company’s filings with the SEC, as required by the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and related rules and regulations, shall be so disclosed in accordance with such laws, rules and regulations. The material features of these Policies and Procedures shall be disclosed in the Company’s Annual Report on Form 10-K or in the Company’s proxy statement, as required by applicable laws, rules and regulations.

ADMINISTRATIVE MEASURES

Management shall institute appropriate administrative measures to provide that all Related Party Transactions are not in violation of, and are reviewed in accordance with, these Policies and Procedures.

INTERPRETATION

In any circumstance where the terms of these Policies and Procedures differ from any existing or newly enacted law, rule, regulation or standard governing the Company, the law, rule, regulation or standard will take precedence over these Policies and Procedures until such time as these Policies and Procedures are changed to conform to the law, rule, regulation or standard.

Page 3 of 3 Exhibit 99.1

XML

Document And Entity Information - shares	3 Months Ended
	Jun. 30, 2019	Jul. 30, 2019
Document Information [Line Items]
Entity Registrant Name	PETMED EXPRESS INC
Entity Central Index Key	0001040130
Trading Symbol	pets
Current Fiscal Year End Date	--03-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding (in shares)		20,174,932
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false
Title of 12(b) Security	Common stock

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019
Current assets:
Cash and cash equivalents	$ 83,398	$ 100,529
Accounts receivable, less allowance for doubtful accounts of $33 and $39, respectively	2,145	2,542
Inventories - finished goods	30,168	21,370
Prepaid expenses and other current assets	1,506	1,408
Prepaid income taxes		582
Total current assets	117,217	126,431
Noncurrent assets:
Property and equipment, net	26,760	27,136
Intangible assets	860	860
Total noncurrent assets	27,620	27,996
Total assets	144,837	154,427
Current liabilities:
Accounts payable	15,689	16,275
Accrued expenses and other current liabilities	3,325	2,351
Income taxes payable	1,241
Total current liabilities	20,255	18,626
Deferred tax liabilities	939	1,121
Total liabilities	21,194	19,747
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.001 par value, 5,000 shares authorized; 3 convertible shares issued and outstanding with a liquidation preference of $4 per share	9	9
Common stock, $.001 par value, 40,000 shares authorized; 20,060 and 20,674 shares issued and outstanding, respectively	20	21
Additional paid-in capital	1,617	12,478
Retained earnings	121,997	122,172
Total shareholders' equity	123,643	134,680
Total liabilities and shareholders' equity	$ 144,837	$ 154,427

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) shares in Thousands, $ in Thousands	Jun. 30, 2019	Mar. 31, 2019
Allowance for doubtful accounts	$ 33	$ 39
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000	5,000
Preferred stock, liquidation preference (in dollars per share)	$ 4	$ 4
Preferred stock, shares issued (in shares)	3	3
Preferred stock, shares outstanding (in shares)	3	3
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	40,000	40,000
Common stock, shares issued (in shares)	20,060	20,674
Common stock, shares outstanding (in shares)	20,060	20,674

XML

Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Sales	$ 79,988	$ 87,390
Cost of sales	58,127	57,436
Gross profit	21,861	29,954
Operating expenses:
General and administrative	6,508	6,934
Advertising	8,624	6,707
Depreciation	568	556
Total operating expenses	15,700	14,197
Income from operations	6,161	15,757
Other income:
Interest income, net	567	379
Other, net	257	317
Total other income	824	696
Income before provision for income taxes	6,985	16,453
Provision for income taxes	1,642	3,871
Net income	5,343	12,582
Comprehensive income	$ 5,343	$ 12,582
Net income per common share:
Basic (in dollars per share)	$ 0.26	$ 0.62
Diluted (in dollars per share)	$ 0.26	$ 0.62
Weighted average number of common shares outstanding:
Basic (in shares)	20,235	20,408
Diluted (in shares)	20,245	20,449
Cash dividends declared per common share (in dollars per share)	$ 0.27	$ 0.25

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net income	$ 5,343	$ 12,582
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	568	556
Share based compensation	635	719
Deferred income taxes	(182)	(165)
Bad debt expense	25	32
(Increase) decrease in operating assets and increase (decrease) in liabilities:
Accounts receivable	372	(171)
Inventories - finished goods	(8,798)	(1,709)
Prepaid income taxes	582	788
Prepaid expenses and other current assets	(98)	(396)
Accounts payable	(586)	5,908
Accrued expenses and other current liabilities	934	643
Income taxes payable	1,241	3,247
Net cash provided by operating activities	36	22,034
Cash flows from investing activities:
Purchases of property and equipment	(192)	(306)
Net cash used in investing activities	(192)	(306)
Cash flows from financing activities:
Repurchase and retirement of common stock	(11,496)
Dividends paid	(5,479)	(5,103)
Net cash used in financing activities	(16,975)	(5,103)
Net (decrease) increase in cash and cash equivalents	(17,131)	16,625
Cash and cash equivalents, at beginning of period	100,529	77,936
Cash and cash equivalents, at end of period	83,398	94,561
Supplemental disclosure of cash flow information:
Dividends payable in accrued expenses	$ 243	$ 288

XML

Note 1 - Summary of Significant Accounting Policies

3 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

Note

1:

Summary of Significant Accounting Policies

Organization

PetMed Express, Inc. and subsidiaries, d/b/a

1

-

800

-PetMeds (the “Company”), is a leading nationwide pet pharmacy. The Company markets prescription and non-prescription pet medications, health products, and supplies for dogs, cats, and horses, direct to the consumer. The Company offers consumers an attractive alternative for obtaining pet medications in terms of convenience, price, and speed of delivery. The Company markets its products through national advertising campaigns, which aim to increase the recognition of the

“1

-

800

-PetMeds” brand name, and “PetMeds” family of trademarks, increase traffic on its website at

www.1800petmeds.com

, acquire new customers, and maximize repeat purchases. The majority of the Company’s sales are to residents in the United States. The Company’s corporate headquarters and distribution facility is located in Delray Beach, Florida. The Company’s fiscal year end is

March 31,

and references herein to fiscal

2020

or fiscal

2019

refer to the Company's fiscal years ending

March 31, 2020

and

2019,

respectively.

Basis of Presentation and Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form

10

-Q and, therefore, do

not

include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of the Company at

June 30, 2019,

the Statements of Comprehensive Income for the

three

months ended

June 30, 2019

and

2018,

and Cash Flows for the

three

months ended

June 30, 2019

and

2018.

The results of operations for the

three

months ended

June 30, 2019

are

not

necessarily indicative of the operating results expected for the fiscal year ending

March 31, 2020.

These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s annual report on Form

10

-K for the fiscal year ended

March 31, 2019.

The Condensed Consolidated Financial Statements include the accounts of PetMed Express, Inc. and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The carrying amounts of the Company's cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments.

Recent Accounting Pronouncements

In

February 2016,

the Financial Accounting Standards Board (“FASB”) issued guidance on leases which supersedes the current lease guidance. The core principle requires lessees to recognize the assets and liabilities that arise from nearly all leases in the statement of financial position. Accounting applied by lessors will remain largely consistent with previous guidance. Additional changes are set to align lessor accounting with the revised lessee model and the FASB’s revenue recognition guidance. The amendments are effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this standard on

April 1, 2019,

using this effective date as the date of initial application.

Consequently, on adoption, the Company recognized an additional current operating liability of approximately

$275,000

,

with a corresponding right of use asset of approximately the same amount based on the present value of the remaining rental payments under current leasing standards for existing operating leases. The lease liability and right of use asset is reflected in the condensed consolidated balance sheet as part of accrued expenses and other current liabilities and as part of prepaid expenses and other current assets. The amended guidance did

not

have a material impact on the Company’s condensed consolidated financial statements.

The Company does

not

believe that any other recently issued, but

not

yet effective, accounting standards, if currently adopted, will have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.

XML

Note 2 - Revenue Recognition

3 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

Note

2:

Revenue Recognition

The Company generates revenue by selling pet medication products and pet supplies. Certain pet supplies offered on the Company’s website are drop shipped to customers. The Company considers itself the principal in the arrangement because the Company controls the specified good before it is transferred to the customer. Revenue contracts contain

one

performance obligation, which is delivery of the product; customer care and support is deemed

not

to be a material right to the contract. The transaction price is adjusted at the date of sale for any applicable sales discounts and an estimate of product returns, which are estimated based on historical patterns, however it is

not

considered a key judgment. There are

no

amounts excluded from the variable consideration. Revenue is recognized when control transfers to the customer at the point in time in which shipment of the product occurs. This key judgment is determined as the shipping point represents the point in time in which the Company has a present right to payment, title has transferred to the customer, and the customer has assumed the risks and rewards of ownership. Outbound shipping and handling fees are an accounting policy election, and are included in sales as the Company considers itself the principal in the arrangement given responsibility for supplier selection and discretion over pricing. Shipping costs associated with outbound freight after control over a product has transferred to a customer are an accounting policy election and are accounted for as fulfillment costs and are included in cost of sales.

The Company disaggregates revenue in the following

two

categories: (

1

) reorder revenue vs new order revenue, and (

2

) internet revenue vs. contact center revenue. The following table illustrates revenue by various classifications:

Three Months Ended June 30,
Revenue (In thousands)	2019		%			2018		%			$ Variance			% Variance
Reorder Sales	$	67,742		84.7	%	$	71,501		81.8	%	$	(3,759	)		-5.3	%
New Order Sales		12,246		15.3	%		15,889		18.2	%		(3,643	)		-22.9	%
Total Net Sales	$	79,988		100.0	%	$	87,390		100.0	%	$	(7,402	)		-8.5	%
Internet Sales	$	67,023		83.8	%	$	74,320		85.0	%	$	(7,297	)		-9.8	%
Contact Center Sales		12,965		16.2	%		13,070		15.0	%		(105	)		-0.8	%
Total Net Sales	$	79,988		100.0	%	$	87,390		100.0	%	$	(7,402	)		-8.5	%

The majority of the Company’s sales are paid by credit cards and the Company usually receives the cash settlement in

two

to

three

banking days. Credit card sales minimize the accounts receivable balances relative to sales. The Company had

no

material contract asset or liability balances as of

June 30, 2019

or

March 31, 2019.

XML

Note 3 - Net Income Per Share

3 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

3

:

Net Income Per Share

In accordance with the provisions of Accounting Standards Codification (“ASC”) Topic

260

(“

Earnings Per Share

”) basic net income per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per common share includes the dilutive effect of potential restricted stock and the effects of the potential conversion of preferred shares, calculated using the treasury stock method. Unvested restricted stock and convertible preferred shares issued by the Company represent the only dilutive effect reflected in the diluted weighted average shares outstanding.

The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share computations for the periods presented (in thousands, except for per share amounts):

	Three Months Ended June 30,
	2019		2018
Net income (numerator):
Net income	$	5,343	$	12,582
Shares (denominator):
Weighted average number of common shares outstanding used in basic computation		20,235		20,408
Common shares issuable upon vesting of restricted stock		-		31
Common shares issuable upon conversion of preferred shares		10		10
Shares used in diluted computation		20,245		20,449
Net income per common share:
Basic	$	0.26	$	0.62
Diluted	$	0.26	$	0.62

For the

three

months ended

June 30, 2019

and

2018,

136,601

and

77,350

shares of common restricted stock, respectively, were excluded from the computations of diluted net income per common share, as their inclusion would have had an anti-dilutive effect on diluted net income per common share.

XML

Note 4 - Accounting for Stock-based Compensation

3 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note

4

:

Accounting for

Stock-Based Compensation

The Company records compensation expense associated with restricted stock in accordance with ASC Topic

718

(

“Share Based Payment

”

) (ASU

2016

-

09

). The compensation expense related to all of the Company’s stock-based compensation arrangements is recorded as a component of general and administrative expenses. The Company had

972,175

restricted common shares issued under the

2006

Employee Equity Compensation Restricted Stock Plan (

“2006

Employee Plan”),

85,033

restricted common shares issued under the

2016

Employee Equity Compensation Restricted Stock Plan (

“2016

Employee Plan” and collectively referred to with the

2006

Employee Plan as the “Employee Plans”),

272,000

restricted common shares issued under the

2006

Outside Director Equity Compensation Restricted Stock Plan (

“2006

Director Plan”), and

97,500

restricted common shares issued under the

2015

Outside Director Equity Compensation Restricted Stock Plan (

“2015

Director Plan”, and collectively referred to with the

2006

Director Plan as the “Director Plans”) at

June 30, 2019,

all shares of which were issued subject to a restriction or forfeiture period that lapses ratably on the first, second, and

third

anniversaries of the date of grant, and the fair value of which is being amortized over the

three

-year restriction period.

The Company did

not

issue any shares of restricted stock during the quarter. For the quarters ended

June 30, 2019

and

2018,

the Company recognized

$635,000

and

$719,000,

respectively, of compensation expense related to the Employee and Director Plans. At

June 30, 2019

and

2018,

there was

$3.2

million and

$3.7

million of unrecognized compensation cost related to the non-vested restricted stock awards, respectively, which is expected to be recognized over the next

three

years. At

June 30, 2019

and

2018,

there were

150,000

and

193,000

non-vested restricted shares, respectively.

XML

Note 5 - Fair Value

3 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

5

:

Fair Value

The Company carries cash and cash equivalents and investments at fair value in the Condensed Consolidated Balance Sheets. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. ASC Topic

820

(“Fair Value Measurements”) establishes a

three

-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 

1

- Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 

2

- Include other inputs that are directly or indirectly observable in the marketplace.

Level 

3

- Unobservable inputs which are supported by little or

no

market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. At

June 30, 2019,

the Company had invested the majority of its

$83.4

million cash and cash equivalents balance in money market funds which are classified within level

1.

XML

Note 6 - Commitments and Contingencies

3 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

6

: Commitments and Contingencies

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.

19

-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.

In

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.

On

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.

19

-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

no

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

no

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.

XML

Note 7 - Changes in Shareholders' Equity

3 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note

7

: Changes in

S

hare

holders’

Equity:

Changes in shareholders’ equity for the

three

months ended

June 30, 2019

is summarized below (in thousands):

	Additional
	Paid-In			Retained
	Capital			Earnings
Beginning balance at March 31, 2019:	$	12,478		$	122,172
Share based compensation		635			-
Dividends declared		-			(5,518	)
Repurchase and retirement of common stock		(11,496	)		-
Net income		-			5,343
Ending balance at June 30, 2019:	$	1,617		$	121,997

Changes in shareholders’ equity for the

three

months ended

June 30, 2018

is summarized below (in thousands):

	Additional
	Paid-In		Retained
	Capital		Earnings
Beginning balance at March 31, 2018:	$	9,381	$	106,320
Share based compensation		719		-
Dividends declared		-		(5,151	)
Net income		-		12,582
Ending balance at June 30, 2018:	$	10,100	$	113,751

During the quarter ended

June 30, 2019,

the Company purchased and retired approximately

613,000

shares of its common stock for approximately

$11.5

million. There were

no

shares of common stock that were purchased or retired in the quarter ended

June 30, 2018.

At

June 30, 2019,

the Company had approximately

$28.7

million remaining under the Company’s share repurchase plan.

XML

Note 8 - Income Taxes

3 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

8

: Income Taxes

For the quarters ended

June 30, 2019

and

2018,

the Company recorded an income tax provision of approximately

$1.6

million and

$3.9

million, respectively. The effective tax rates for both the quarters ended

June 30, 2019

and

2018

was approximately

23.5%

.

XML

Note 9 - Subsequent Events

3 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Subsequent Events [Text Block]

Note

9

: Su

b

sequent Event

s

On

July 22, 2019

,

the Board of Directors declared a quarterly dividend of

$0.27

per share. The Board established an

August 2, 2019

record date and an

August 9, 2019

payment date. Based on the outstanding share balance as of

July 30, 2019

the Company estimates the dividend payable to be approximately

$5.4

million.

On

July 26, 2019,

the Board of Directors approved the issuance of

40,000

restricted shares to the Company’s CEO, under the terms of the CEO’s amended Executive Employment Agreement, and

37,125

restricted shares to certain employees of the Company, pursuant to the

2016

Employee Plan. The Board also approved the issuance of

37,500

restricted shares to the independent directors, pursuant to the

2015

Director Plan.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis Of Presentation and Consolidation [Policy Text Block]

Basis of Presentation and Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form

10

-Q and, therefore, do

not

include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of the Company at

June 30, 2019,

the Statements of Comprehensive Income for the

three

months ended

June 30, 2019

and

2018,

and Cash Flows for the

three

months ended

June 30, 2019

and

2018.

The results of operations for the

three

months ended

June 30, 2019

are

not

necessarily indicative of the operating results expected for the fiscal year ending

March 31, 2020.

These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s annual report on Form

10

-K for the fiscal year ended

March 31, 2019.

The Condensed Consolidated Financial Statements include the accounts of PetMed Express, Inc. and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated upon consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

The carrying amounts of the Company's cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In

February 2016,

the Financial Accounting Standards Board (“FASB”) issued guidance on leases which supersedes the current lease guidance. The core principle requires lessees to recognize the assets and liabilities that arise from nearly all leases in the statement of financial position. Accounting applied by lessors will remain largely consistent with previous guidance. Additional changes are set to align lessor accounting with the revised lessee model and the FASB’s revenue recognition guidance. The amendments are effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this standard on

April 1, 2019,

using this effective date as the date of initial application.

Consequently, on adoption, the Company recognized an additional current operating liability of approximately

$275,000

,

with a corresponding right of use asset of approximately the same amount based on the present value of the remaining rental payments under current leasing standards for existing operating leases. The lease liability and right of use asset is reflected in the condensed consolidated balance sheet as part of accrued expenses and other current liabilities and as part of prepaid expenses and other current assets. The amended guidance did

not

have a material impact on the Company’s condensed consolidated financial statements.

The Company does

not

believe that any other recently issued, but

not

yet effective, accounting standards, if currently adopted, will have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.

XML

Note 2 - Revenue Recognition (Tables)

3 Months Ended

Jun. 30, 2019

Notes Tables

Disaggregation of Revenue [Table Text Block]

Three Months Ended June 30,
Revenue (In thousands)	2019		%			2018		%			$ Variance			% Variance
Reorder Sales	$	67,742		84.7	%	$	71,501		81.8	%	$	(3,759	)		-5.3	%
New Order Sales		12,246		15.3	%		15,889		18.2	%		(3,643	)		-22.9	%
Total Net Sales	$	79,988		100.0	%	$	87,390		100.0	%	$	(7,402	)		-8.5	%
Internet Sales	$	67,023		83.8	%	$	74,320		85.0	%	$	(7,297	)		-9.8	%
Contact Center Sales		12,965		16.2	%		13,070		15.0	%		(105	)		-0.8	%
Total Net Sales	$	79,988		100.0	%	$	87,390		100.0	%	$	(7,402	)		-8.5	%

XML

Note 3 - Net Income Per Share (Tables)

3 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended June 30,
	2019		2018
Net income (numerator):
Net income	$	5,343	$	12,582
Shares (denominator):
Weighted average number of common shares outstanding used in basic computation		20,235		20,408
Common shares issuable upon vesting of restricted stock		-		31
Common shares issuable upon conversion of preferred shares		10		10
Shares used in diluted computation		20,245		20,449
Net income per common share:
Basic	$	0.26	$	0.62
Diluted	$	0.26	$	0.62

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Note 7 - Changes in Shareholders' Equity (Tables)

3 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Stockholders Equity [Table Text Block]

	Additional
	Paid-In			Retained
	Capital			Earnings
Beginning balance at March 31, 2019:	$	12,478		$	122,172
Share based compensation		635			-
Dividends declared		-			(5,518	)
Repurchase and retirement of common stock		(11,496	)		-
Net income		-			5,343
Ending balance at June 30, 2019:	$	1,617		$	121,997

	Additional
	Paid-In		Retained
	Capital		Earnings
Beginning balance at March 31, 2018:	$	9,381	$	106,320
Share based compensation		719		-
Dividends declared		-		(5,151	)
Net income		-		12,582
Ending balance at June 30, 2018:	$	10,100	$	113,751

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Note 1 - Summary of Significant Accounting Policies (Details Textual) - Accounting Standards Update 2016-02 [Member]	Apr. 01, 2019 USD ($)
Prepaid Expenses and Other Current Assets [Member]
Operating Lease, Right-of-Use Asset	$ 275,000
Accrued Expenses and Other Current Liabilities [Member]
Operating Lease, Liability, Current	$ 275,000

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Note 2 - Revenue Recognition (Details Textual)	3 Months Ended
	Jun. 30, 2019
Minimum [Member]
Credit Card Sales, Cash Settlement Period	2 days
Maximum [Member]
Credit Card Sales, Cash Settlement Period	3 days

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Note 2 - Revenue Recognition - Disaggregation of Revenue by Type (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Revenues	$ 79,988	$ 87,390
Revenues, percentage	100.00%	100.00%
Revenues, variance	$ (7,402)
Revenues, variance, percentage	(8.50%)
Internet [Member]
Revenues	$ 67,023	$ 74,320
Revenues, percentage	83.80%	85.00%
Revenues, variance	$ (7,297)
Revenues, variance, percentage	(9.80%)
Contact Center [Member]
Revenues	$ 12,965	$ 13,070
Revenues, percentage	16.20%	15.00%
Revenues, variance	$ (105)
Revenues, variance, percentage	(0.80%)
Reorder Customer [Member]
Revenues	$ 67,742	$ 71,501
Revenues, percentage	84.70%	81.80%
Revenues, variance	$ (3,759)
Revenues, variance, percentage	(5.30%)
New Order Customer [Member]
Revenues	$ 12,246	$ 15,889
Revenues, percentage	15.30%	18.20%
Revenues, variance	$ (3,643)
Revenues, variance, percentage	(22.90%)

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Note 3 - Net Income Per Share (Details Textual) - shares	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	136,601	77,350

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Note 3 - Net Income Per Share - Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Net income (numerator):
Net income	$ 5,343	$ 12,582
Shares (denominator):
Weighted average number of common shares outstanding used in basic computation (in shares)	20,235	20,408
Common shares issuable upon vesting of restricted stock (in shares)		31
Common shares issuable upon conversion of preferred shares (in shares)	10	10
Shares used in diluted computation (in shares)	20,245	20,449
Net income per common share
Basic (in dollars per share)	$ 0.26	$ 0.62
Diluted (in dollars per share)	$ 0.26	$ 0.62

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Note 4 - Accounting for Stock-based Compensation (Details Textual) - USD ($)	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Share-based Payment Arrangement, Expense	$ 635,000	$ 719,000
2006 Employee Equity Compensation Restricted Stock Plan (the "Employee Plan") [Member] | Restricted Stock [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Gross	972,175
2016 Employee Equity Compensation Restricted Stock Plan [Member] | Restricted Stock [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Gross	85,033
2006 Outside Director Equity Compensation Restricted Stock Plan (the "Director Plan") [Member] | Restricted Stock [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Gross	272,000
2015 Outside Director Equity Compensation Restricted Stock Plan ("2015 Director Plan") [Member] | Restricted Stock [Member]
Stock Issued During Period, Shares, Restricted Stock Award, Gross	97,500
Employee and Director Plans [Member] | Restricted Stock [Member]
Share-based Payment Arrangement, Nonvested Award, Excluding Option, Cost Not yet Recognized, Amount	$ 3,200,000	$ 3,700,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition	3 years	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Ending Balance	150,000	193,000

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Note 5 - Fair Value (Details Textual) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 83,398	$ 100,529	$ 94,561	$ 77,936

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Note 7 - Changes in Shareholders' Equity (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Stock Repurchased and Retired During Period, Shares	613,000	0
Stock Repurchased and Retired During Period, Value	$ 11.5
Stock Repurchase Program, Remaining Authorized Repurchase Amount	$ 28.7

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Note 7 - Changes in Shareholders' Equity and Comprehensive Income - Schedule of Changes in Shareholders' Equity (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Balance	$ 134,680
Repurchase and retirement of common stock	(11,500)
Net income	5,343	$ 12,582
Balance	123,643
Additional Paid-in Capital [Member]
Balance	12,478	9,381
Share based compensation	635	719
Dividends declared
Repurchase and retirement of common stock	(11,496)
Net income
Balance	1,617	10,100
Retained Earnings [Member]
Balance	122,172	106,320
Share based compensation
Dividends declared	(5,518)	(5,151)
Repurchase and retirement of common stock
Net income	5,343	12,582
Balance	$ 121,997	$ 113,751

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Note 8 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Income Tax Expense (Benefit), Total	$ 1,642	$ 3,871
Effective Income Tax Rate Reconciliation, Percent, Total	23.50%	23.50%

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Note 9 - Subsequent Events (Details Textual) - Subsequent Event [Member] - USD ($) $ / shares in Units, $ in Millions	Jul. 26, 2019	Jul. 22, 2019
Dividends Payable, Amount Per Share		$ 0.27
Dividends Payable		$ 5.4
Dividends Payable, Date Declared		Jul. 22, 2019
Dividends Payable, Date of Record		Aug. 02, 2019
Dividends Payable, Date to be Paid		Aug. 09, 2019
Restricted Stock [Member] | 2016 Employee Equity Compensation Restricted Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	37,125
Chief Executive Officer [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	40,000
Director [Member] | Restricted Stock [Member] | 2015 Outside Director Equity Compensation Restricted Stock Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	37,500