# Petmed Express Inc: Form 10-K for the period ended Mar 31, 2025 - Company: [Petmed Express Inc](/companies/pets.md) (CIK 1040130) - Form: 10-K - Filed: 2025-10-14 - Accepted by EDGAR: Oct 14, 2025, 16:27 ET - Period: 2025-03-31 - Accession: 0001040130-25-000072 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1040130/000104013025000072/pets-20250331.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1040130/000104013025000072/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2025-03-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 12 months, 2024-04-01 to 2025-03-31 | $227.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Cost of revenue | 12 months, 2024-04-01 to 2025-03-31 | $157.8m | us-gaap:CostOfGoodsAndServicesSold | | Gross profit | 12 months, 2024-04-01 to 2025-03-31 | $69.1m | us-gaap:GrossProfit | | Operating income | 12 months, 2024-04-01 to 2025-03-31 | −$1.5m | us-gaap:OperatingIncomeLoss | | Income tax | 12 months, 2024-04-01 to 2025-03-31 | $5.7m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 12 months, 2024-04-01 to 2025-03-31 | −$6.3m | us-gaap:NetIncomeLoss | | Diluted EPS | 12 months, 2024-04-01 to 2025-03-31 | −$0.30 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 12 months, 2024-04-01 to 2025-03-31 | −$0.30 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2024-04-01 to 2025-03-31 | 20,596,022 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2024-04-01 to 2025-03-31 | $4.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2024-04-01 to 2025-03-31 | $5.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Dividends paid | 12 months, 2024-04-01 to 2025-03-31 | $181.0k | us-gaap:PaymentsOfDividendsCommonStock | | Cash and equivalents | at 2025-03-31 | $54.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2025-03-31 | $78.9m | us-gaap:AssetsCurrent | | Total assets | at 2025-03-31 | $148.7m | us-gaap:Assets | | Current liabilities | at 2025-03-31 | $62.8m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2025-03-31 | $63.6m | us-gaap:Liabilities | | Shareholders' equity | at 2025-03-31 | $85.1m | us-gaap:StockholdersEquity | ## Business As filed, 33,012 characters. ### GENERAL PetMed Express, Inc. and subsidiaries, d/b/a PetMeds®, and as parent company of PetCareRx®, is a pioneer in pet healthcare, building a consumer-first digital platform in 1996 that transformed the way customers fulfill pet medications. Nearly thirty years later, as a leading nationwide direct-to-consumer pet health and wellness retailer, the Company markets and sells directly to consumers through its websites (Petmeds.com and PetCareRx.com), customer contact center (1-800-PetMeds), and mobile applications (iOS and Android). The Company provides access to top branded pharmaceuticals, generic medications, compounded prescription medications, pharmacy fulfillment, and personalized autoship capabilities. Our digital platform offers pet healthcare solutions for a broad range of chronic conditions, including those related to allergy, arthritis, anxiety, kidney, hyperthyroidism, and others for cat, dog, and horses. We also offer access to a range of non-prescription health and wellness products and Rx food, non-Rx food, and treats. PetMeds and PetCareRx receive the pet’s prescription through our websites and connects to the customer's licensed veterinarian for approval. Through our content website, pethealthmd.com, consumers can access educational articles for any health-related questions regarding their pets. The Company offers consumers an attractive alternative for obtaining pet medications, foods, and supplies in terms of convenience, price, speed of delivery, and valued customer service. Through partnerships with 75,000 veterinarians and a loyal customer base who rely on our services, our in-house pharmacies and extended pet healthcare partnerships seek to offer unparalleled value and convenience to families at every stage of their pets' lives. We are deeply committed to the mission and purpose that has driven our business from the start. Since our founding, we have fulfilled orders for almost twenty-million pet parents in all 50 states and have been instrumental in providing products that help pets live longer, healthier lives. The support of our customers nationwide has been the cornerstone of our success. Honoring our combined legacy, we bring our core values to every role we undertake as we empower pet families, ensuring they have access to products and services that can provide the best possible care for their dogs, cats, and horses. Since 1996, PetMeds has been serving as a trusted source for pet health across North America. In April 2023, we acquired PetCareRx, Inc. (“PetCareRx”), an online supplier of pet medications, foods, and supplies based in New York. This acquisition added a catalog of Rx and non-Rx food and supplies, allowing us to expand beyond our core offering of pet prescriptions. Since this acquisition, we provide a more extensive selection of premium food, supplements, treats, and other pet supplies. Together, our brands are dedicated to delivering exceptional science-backed, veterinarian approved products from quality suppliers, making it easier for families to address preventive and chronic health needs in order to support the longevity of their companion animals. Over the years, our organization has made investments in our pharmacies to ensure regulatory compliance, accreditations, and operational excellence which include implementing a rigorous verification process from order to shipment to ensure top quality control. Employing licensed pharmacists and a 50-state licensed Pharmacist-in-Charge for each of our two pharmacy locations, allows us to provide focused and specialized care backed by expertise. We continuously monitor and update our regulatory licenses in every state, including the U.S. Virgin Islands. Our pharmacies are accredited by the NABP.Com and LegitScript and are focused on exceeding all federal and state regulatory requirements.This specialized expertise creates a defensible moat that is further supported by the nearly thirty years of pet health data, and partnerships with over 75,000 veterinarians. As a core service to our customers, pet owners have the ability to contact our customer support agents and pharmacists at 1-800-petmeds for assistance with their animals' wellness needs via telephone, chat, and email. Additionally, we offer extended services, including telehealth, pet insurance, and employee benefits programs, through our core partners Dutch, Vetster, and Pet Synergy Group. The Company's executive headquarters offices are currently located at 420 South Congress Avenue, Delray Beach, Florida 33445, and our telephone number is (561) 526-4444. The Company has a March 31 fiscal year. ### OUR INDUSTRY Our business focuses on a specific segment of the pet industry: pet health for dogs, cats, and horses. Within this segment, our merchandise categories include prescription medications, generic medications, over-the-counter (OTC) solutions, vitamins and supplements, prescription food, non-prescription food, and a comprehensive assortment of pet supplies including treats. The total addressable market for pet medications, foods, and health products and services is vast and continuously expanding. According to the American Pet Products Association, pet spending in the United States increased by 3% to $152 billion in 2024, with veterinary care and prescription medications accounting for $39.8 billion or 26% of that total. The increasing demand for pet wellness products presents significant potential for us to expand our footprint and capture a larger share of this thriving market through our private label programs. ### THE PET CONSUMER According to the April 2025 Cleveland Research Pet Retail and Animal Health Report: - Approximately 40% of consumers expect to significantly or slightly decrease their purchases due to anticipated tariffs and stock market volatility. - The outlook across the pet landscape headed into 2025 shows muted pet household adoptions coupled with pricing pressure – overall resulting in pressured vet visits and spend at pet retail Based on the items from the above report: - We are executing a series of strategic initiatives that enhance customer experience, optimize operational efficiency, and leverage innovation to drive long-term shareholder value. - We believe that a high level of customer care and support is critical in retaining and expanding our customer base. Our goal is to create a concierge customer experience through modern technology that incorporates AI, automation, and product management that drives personalized journeys across all touchpoints. - To cater to a diverse range of budgets, we sell products at multiple price points and offer promotions to ensure that every customer can find products that meet their needs and preferences. - We offer auto-ship options for many of our products, ensuring convenient and consistent compliance for pets. - Looking ahead, we are evolving from a digital-only model to a true omnichannel business offering consumers a range of products and services. That means meeting pet parents where they are, however they choose to shop. More than 1.7 million customers have purchased from us within the last three fiscal years, including customers acquired in April 2023 as a part of our PetCareRx acquisition. We attracted approximately 351,000 and 457,000 new customers in fiscal 2025 and 2024, respectively. Our customers are located throughout the United States, with approximately 50% of customers residing in California, Florida, Texas, New York, Pennsylvania, North Carolina, Georgia, and Virginia. The average order value increased slightly year over year and was approximately $97 for fiscal 2025 and $94 for fiscal 2024. ### PRODUCTS AND SERVICES PetMeds offers a wide array of products and services dedicated to pet health and wellness. As a licensed online pharmacy, we provide medications for dogs, cats, and horses, ensuring that pets receive the necessary treatments prescribed by their veterinarians. We address the most common conditions - allergies, arthritis, and anxiety and offer prescriptions for more chronic conditions such as heartworm, dermatitis, thyroid, diabetes, pain medications, heart/blood pressure, other specialty medications. A large percentage of our business is selling flea and tick preventatives through Rx, non-Rx, and OTC supplements and sprays. In addition, we stock a variety of OTC medications as alternatives to prescriptions that include bone and joint care products, vitamins, treats, nutritional supplements, hygiene products and other health-related supplies. PetMeds also offers the best-named brands in premium pet foods and treats including veterinary prescription Rx diets. Our exclusive range of private label products, including joint enhancers, vitachews, shampoos and flea and tick prevention offers exceptional value to our customers at a high margin. Our private label assortment is launching on Amazon in early FY2026 and is expected to launch across multi channels in the latter part of the fiscal year. To obtain prescription medications, we have a three step process: customers place the order and provide their veterinarian's details, and PetMeds handles the entire end-to-end verification process before shipping. Additionally, PetMeds has veterinary pharmacists and technicians on staff to answer pet owners' medication-related questions, aiming to be a trusted resource for pet health needs. ### Pet Health Customer Care Specialists - Customer Contact Center We believe that a high level of customer care and support is critical in retaining and expanding our customer base. We provide our employees with ongoing training programs under the supervision of our training managers that include a variety of topics such as product knowledge, technology usage, customer service tips, and the relationship between our Company and veterinarians. Our customer contact center agents respond to customers’ e-mails, calls, and live web chats that are related to products, order status, prices, and shipping. Having consolidated our two branded teams and incorporating a best-in-class technology provider, our customer care agents ensure that we can maximize our representatives’ time, ensuring top-tier customer care, service, and support. ### Holistic Wellness Services: **Pet Telemedicine**: Since 2022, the Company has engaged in partnerships to provide telemedicine services, with the convenience of consultations, diagnoses and in certain states, prescriptions from board-certified veterinarians all from the comfort of their homes. In May 2025, we announced our strategic partnership with Dutch Pet, Inc. ("Dutch"), a virtual veterinary care provider, to expand our health services ecosystem with affordable, accessible pet healthcare options. This new partnership enables pet parents to leverage Dutch’s convenient technology and veterinary team to secure prescriptions for PetMeds’ broad selection of medications in a timely manner. Under the partnership, pet parents are able to sign up for a monthly Dutch membership and be connected virtually with veterinarians for 24/7 appointments in 34 states. **Employee Pet Benefits**: We continue to develop partnerships that allow us to be part of employer bundled services, offering discounted pet care solutions that provide participating companies' employees with access to our membership programs through their respective company employee benefits offerings. These membership programs include a variety of exclusive PetPlus perks which includes discounts for more than 700,000 partners, and valuable telehealth, pet training, and delivery services that streamline educational content for pet parents ### OUR EXPERT VETERINARY ADVISORY BOARD To further our commitment to connecting with customers through education and professional credibility, the Company's Veterinary Advisory Board (VAB) provides insights to help ensure that all of our initiatives result in improved patient care. This esteemed board consisted of five expert veterinarians across the country throughout FY2025, with decades of experience in private practice and academia, helping shape the future of veterinary medicine. ### STRATEGY The Company is committed to evolving from a leading digital-only model to a true omnichannel business, offering consumers a range of products and services. As part of this transformation, we are executing a series of strategic initiatives that expand into multi channels, the first of which is Amazon. We have added compound pharmacy partnerships, a key area of growth within the animal health industry, including top pharmacy Mixlab, which has five labs located across the country. We are also adding a global licensing agreement for non-consumable pet products set to launch in retail channels in early calendar year 2026. And lastly, we are introducing private label functional health products in the latter half of FY2026 - veterinary formulated and exclusive to PetMeds - into both DTC and wholesale channels enhancing margins, differentiating the company, and building brand loyalty At the same time, we are investing in modernizing our technology, including our e-commerce infrastructure and cloud environments, and in our customer experience, including speed to customer. We believe all of this will drive long-term shareholder value. Concurrently, we are balancing near-term business goals with purposeful investments that support customer acquisition and retention. ### DISTRIBUTION CHANNELS We market and sell our products and services through three primary distribution channels: 1E-commerce Websites – Through our owned and operated websites and mobile applications, including PetMeds.com and PetCareRx.com, we offer customers convenient and accessible platforms to purchase prescription and non-prescription pet medications, food, and wellness products. Key features of our websites include AutoShip subscriptions (approximately 56.1% of our sales were generated via our AutoShip and membership program in our 4th quarter ended March 31, 2025), "ask-the-vet" services, VetLive consultations, live web chat, easy refill medication reminders, a local veterinarian finder, and express checkout options. 2Customer Contact Center – We operate a dedicated toll-free customer service center staffed by trained Pet Health Specialists who provide personalized support and assist with product inquiries, prescription processing, and order placement. 3PetAssure Broker Network – Through PetAssure, we also distribute products and wellness services via a brokered benefits model, primarily targeting employers offering pet health benefits as part of their employee wellness programs. We are also currently investing in enhancements to our digital platforms to further personalize the customer journey, optimize navigation and conversion, and ensure a seamless omnichannel experience across web, mobile, and customer service touchpoints. ### Marketing and Lifecycle Engagement As part of our fiscal 2026 marketing strategy we intend to integrate our two brands (PetMeds and PetCareRX) into a customer-centric relevant brand which resonates with our mission and provides direct value to our customers. This includes establishing and building brand recognition to increase customer website traffic, better align with current customer needs, deploy targeted segmentation strategies to reach the right audiences, scale effective campaigns, add new customers, and build strong lifetime customer loyalty that, ultimately, will increase reorders, and develop incremental revenue opportunities. Our 360 integrated marketing strategy includes digital, CRM and offline channels to market to our existing customers and attract new customers. Our campaigns strive to convey our dedicated focus on the well-being of pets and our commitment to accompanying our customers on their pet's wellness journey, which includes both preventative and chronic solutions for cats, dogs and horses across diverse breeds, sizes, ages and conditions. Through social platforms like Instagram and Facebook, we educate and inspire our community with: - Short-form videos on pet wellness - Pet shelter and sporting events content - Lighthearted and funny pet-related and relatable content. Additionally, Pethealthmd.com, our blog and pet health library, serves as an SEO traffic hub, continuously updated with articles covering pet behavior, nutrition, pharmaceutical and natural remedies. The Company aims to create a best-in-class marketing operation through a continuous test-and-learn approach as we progress into fiscal 2026. This will be visible across all customer touchpoints. ### OVERVIEW OF PHARMACY OPERATIONS Our pharmacists and pharmacy technicians oversee the processing of every order and follow a regimented 5-point verification process to ensure our customers receive an order that addresses their pet's needs. We request the following information to process prescription orders: pet information, prescription information, and the veterinarian’s name and phone number. This information is entered into our order processing system, which checks for the verification for prescription medication orders and a valid payment method for all orders. Verified orders are then sent to our fulfillment centers, where items are picked, and then shipped via one of our several shipping carriers. ### SOURCING OF MERCHANDISE INVENTORY We source our inventory from a diverse array of vendors that specialize in prescription, food, and health and wellness-related products that include manufacturers and domestic distributors. Of the thousands of SKUs we offered our customers in fiscal 2025, approximately 81% of all products were purchased from six key suppliers. We believe that deepening our relationships with manufacturers and distributors is crucial to ensuring a reliable supply of the products our customers need, and we continue to rigorously attend to those vendor relationships. As part of our growth strategy, we prioritize maintaining direct relationships with leading pharmaceutical manufacturers, providing both popular prescription and non-prescription medications. These direct relationships not only help us secure an adequate volume of products but also enable us to offer the latest and most trusted pet health solutions. Our continued partnerships with these major manufacturers are a testament to our commitment to quality and reliability in serving our customers. ### DISTRIBUTION OF MERCHANDISE INVENTORY We purchase all of our medication directly from the manufacturer or from FDA registered United States based distributors to ensure the authenticity and safety of all medications. We efficiently manage our inventory and fulfill customer orders from our corporate headquarters in Delray Beach, Florida, and our Northeast warehouse location in Lynbrook, New York while conducting thorough checks on every order received for veterinary approval and prescription labeling accuracy. Our in-house pharmacy, fulfillment and distribution operations oversee the entire supply chain—from order placement and processing to fulfillment and shipping. For prescription medications, we strive to ship immediately upon authorization by the customer’s veterinarian. ### INFORMATION SYSTEMS We utilize a combination of Company-owned and third-party-operated information systems to support our core business functions. These integrated systems provide capabilities across retail operations, merchandising, human resources, and financial reporting. Functional areas supported include digital commerce, inventory management, customer care, supply chain logistics, demand planning, sourcing, payroll, workforce scheduling, and general ledger management. We continue to make strategic investments in modernizing and enhancing our technology infrastructure to improve operational efficiency, scalability, and support digital growth. These investments are designed to strengthen our pharmacy operations, fulfillment center capabilities, MarTech platforms, and loyalty and retention programs, while also enabling faster, data-driven decision making. ### DIGITAL TECHNOLOGY SYSTEMS In fiscal 2026, our Company is focused on advancing the modernization of its digital technology infrastructure to drive operational excellence and support long-term growth. This includes continued upgrades across our e-commerce platforms, call centers, order management systems (OMS), pharmacy systems and fulfillment and inventory management capabilities. Our digital transformation initiatives are aimed at simplifying and integrating business processes, enabling faster innovation, and enhancing system resilience. By unifying our digital ecosystem—including technology frameworks, tools, and talent—we are building a robust foundation to support seamless customer interactions across channels. These ongoing technology investments will position us to adapt quickly to market demands, deliver personalized and efficient customer journeys, and maintain a high level of service reliability and responsiveness. ### COMPETITION We operate in a rapidly evolving, highly competitive, and fragmented business environment. Our competitors include veterinarians, local and national chain specialty retailers, and vendors' own e-commerce stores. Several large retailers have announced entrance into the pet pharmacy space this year. Additionally, consumers' discretionary spending on pets extends to categories like apparel, grooming, boarding, and dog-walking. Operating in a highly competitive industry environment can cause the Company to engage in greater than expected promotional activity at times, which would result in pressure on average unit retail pricing and gross profit. Our distinct advantage lies in our 29 years of expertise, delivered through our team of highly qualified pharmacists and technicians with specialized training in veterinary pharmacology that are licensed across all fifty states. These teams execute a rigorous 5-point verification process and are compliant with all federal regulations set by the FDA and DEA. PetMeds and PetCareRx's pharmacies are accredited by the National Association of Boards of Pharmacy and LegitScripts. In addition to our deeply experienced pharmacists and technicians, our Customer Care team is comprised of many longtime employees as well as new talent, all of whom share a passion for pets and who exemplify our commitment to delivering high-quality products and personalized service to our customers. This combination of quality, expertise, passion and efficiency sets us apart in the marketplace. ### INTELLECTUAL PROPERTY We conduct our business under the trade names “PetMeds” and "PetCareRx" and use a family of trade names all containing the terms “PetMeds”, “PetMed” or "PetCareRx" in some form. We believe the “PetMeds” and "PetCareRx" family of trademarks, have added significant value and are important factors in the marketing of our products. We have also obtained the right to use and control the Internet addresses which include but are not limited to *www.1800petmeds.com, www.1888petmeds.com, www.petmedexpress.com, www.petmed.com, www.petmeds.com,* and *www.petcarerx.com.* We also obtained the right to use and control the Internet addresses *www.petmeds.pharmacy, www.petmed.pharmacy, www.1800petmeds.pharmacy, petcare.pharmacy*, and *petcarerx.pharmacy*, through a National Association of Boards of Pharmacy® initiative to ensure high standards for online pharmacies. We do not expect to lose the ability to use the Internet addresses; however, there can be no assurance in this regard and the loss of these addresses may have a material adverse effect on our financial position and results of operations. We are the exclusive owners of United States trademark registrations for “America’s Largest Pet Pharmacy®,” “America’s Most Trusted Pet Pharmacy®,” “Trusted Pet Medication Experts®,” “PetMed Express, Inc.®,”1-800-PetMeds and Design®,” 1-800-PetMeds®,” “PetMeds®,” “Your Trusted Pet Health Expert®," "PetPlus®," "PetCareRx®," "Nose to Tail®," "Nose to Tail Health®," and "Nose to Tail Savings®," among numerous others. We have also applied for trademark protection for "VetLiveTM." ### GOVERNMENT REGULATION We are subject to a broad range of federal, state, and local laws and regulations that relate to our business. Dispensing prescription medications is governed at the state level by Boards of Pharmacy, or similar regulatory agencies, of each state where prescription medications are dispensed. PetMeds is subject to regulation by the State of Florida and is licensed as a community pharmacy by the Florida Board of Pharmacy, and PetCareRx is subject to regulation by the State of New York and is licensed as a community pharmacy by the New York Pharmacy Board. Our pharmacy practices are also licensed and/or regulated by 48 other state pharmacy boards, the District of Columbia Board of Pharmacy, the U.S. Virgin Islands Board of Pharmacy, and the United States Drug Enforcement Administration ("DEA"), and with respect to our products, by other regulatory authorities including, but not necessarily limited to, the United States Food and Drug Administration (“FDA”) and the United States Environmental Protection Agency ("EPA"). Our registration with the DEA, and state registrations/permits as required, permit us to dispense Schedule IV and Schedule V controlled substances. As a licensed pharmacy in the State of Florida, we are subject to the Florida Pharmacy Act and regulations promulgated thereunder. If we fail to maintain our licenses with the Florida Board of Pharmacy, or if we do not maintain the licenses/registrations/permits from other state pharmacy boards (including our home state pharmacy license in New York for PetCareRx), or if we face actions from the DEA, FDA EPA, or other enforcement regulators, our ability to dispense prescription medications to pet owners could be halted, which could have a material adverse effect on our financial condition and operations. In addition to the foregoing, the FDA regulates animal feed, including pet food, under the Federal Food, Drug, and Cosmetic Act (the “FFDCA”) and its implementing regulations. Although pet foods are not required to obtain premarket approval from the FDA, the FFDCA requires that all animal foods are safe for consumption, produced under sanitary conditions, contain no harmful substances, and are truthfully labeled. Most states also require that pet foods distributed in the state be registered or licensed with the appropriate state regulatory agency. In addition, most facilities that manufacture, process, pack, or hold foods, including pet foods, must register with the FDA and renew their registration every two years, and are subject to periodic FDA inspection. This includes most foreign, as well as domestic facilities. Registration must occur before the facility begins its pet food manufacturing, processing, packing, or holding operations. The labeling of pet foods is regulated by both the FDA and some state regulatory authorities. FDA regulations require proper identification of the product, a net quantity statement, a statement of the name and place of business of the manufacturer or distributor, and proper listing of all the ingredients in order of predominance by weight. Most states also enforce their own labeling regulations. The degree of oversight of the implementation of these regulations varies by state, but typically includes a state review and approval of each product label as a condition of sale in that state. The FDA also regulates the inclusion of specific claims in pet food labeling. For example, pet food products that are labeled or marketed with claims that may suggest that they are intended to treat or prevent disease in pets would potentially meet the statutory definitions of both a food and a drug. Our distribution of pet insurance products under our strategic partnerships also subjects us to state laws and regulations relating to the sale of insurance products, including registering as an insurance distributor in states in which we offer and sell co-branded pet insurance products and otherwise complying with state and federal laws relating to the sale and distribution of insurance products. We rely on legal and operational compliance programs, as well as outside counsel, to guide our business in complying with applicable laws and regulations in the areas in which we do business. In addition, regulatory regime changes may add cost and complexity to our compliance efforts. It is difficult to predict with certainty the potential impact of future regulatory compliance efforts and future costs associated with such matters. Our failure to comply with such laws and regulations may result in adverse actions that could disrupt our operations and adversely affect our financial results. ### HUMAN CAPITAL The Company is committed to fostering a culture that not only advances strategic and key business priorities but also empowers employees to make a positive impact in their communities. We believe that attracting, retaining, and managing a diverse and talented workforce is crucial to our success and our workforce includes individuals of different ages, colors, disabilities, ethnicities, family or marital statuses, gender, or expressions, languages, national origins, physical and mental abilities, political affiliations, races, religions, sexual orientations, socio-economic statuses, veteran statuses, and other characteristics. To ensure our employees have the opportunity to develop and excel, human capital management is a top priority for our executives and Board of Directors, as evidenced by the expansion of the Compensation Committee to the Compensation and Human Capital Committee. We are dedicated to identifying and nurturing the talent necessary for our long-term success. We are intentional about fostering a workplace where employees are encouraged to build their skills and explore opportunities for advancement. This includes access to a variety of resources to enhance their skills and advance their careers, including mentorship programs, individual development opportunities, and exposure to cross-functional projects that provide diverse experiences. Additionally, we offer functional management training, educational opportunities, certification programs, and educational assistance to support our future leaders in their professional growth. We pride ourselves on maintaining a strong corporate culture that upholds high standards of ethics and compliance. Our Code of Business Conduct and Ethics outlines the principles that guide the behavior of our employees, officers, directors, and vendors. To ensure adherence to these standards, we maintain a whistleblower policy and an anonymous hotline for confidential reporting of any suspected policy violations or unethical conduct. Furthermore, all staff members are required to complete anti-harassment training. By fostering a supportive and inclusive environment, we empower our employees to thrive both professionally and personally, driving our company forward and making a meaningful impact in our communities. As of September 30, 2025, we had 173 full-time employees. None of our employees are represented by a labor union or governed by any collective bargaining agreements. We consider relations with our employees to be good. The majority of our employees are connected to our Delray Beach, Florida headquarters and distribution center. Many of our personnel are currently working remotely or in a hybrid work model with the exception of essential on-site workers. We offer our employees a wide array and highly competitive benefits such as life and health (medical, dental, and vision) insurance, medical and dependent care flexible spending accounts, supplemental insurance coverage, pet insurance, parking and commuter benefits, legal services provider network, paid time off (including gender neutral parental leave) and retirement benefits, as well as emotional well-being services through our health insurance program. ### Available Information Our website addresses are *www.petmeds.com* and *www.petcarerx.com*. The information on our websites is not, and shall not be deemed to be, a part of or incorporated into this Annual Report on Form 10-K or any other filings we make with the Securities and Exchange Commission ("SEC"). We file annual, quarterly, and current reports, proxy statements, and other information with the SEC. Our SEC filings, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to the Exchange Act are available free of charge over the Internet on our website at *www.petmeds.com* or at the SEC's website at *www.sec.gov*. Our SEC filings will be available through our website at *www.petmeds.com* as soon as reasonably practicable after we have electronically filed or furnished them to the SEC. ## Risk factors As filed, 70,073 characters. Our operations and financial results are subject to various risks and uncertainties, including those described below, that could materially and adversely affect our business, financial condition, operating results and the trading price of our common stock. Because of the following factors, as well as other factors affecting the Company’s results of operations and financial condition, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. This discussion of risk factors contains forward-looking statements. This section should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. ### Regulatory Risks *Any failure to comply with various state or federal regulations covering our pet health business, including the dispensing of prescription pet medications may subject us to reprimands, sanctions, probations, fines, suspensions, or the loss of one or more of our pharmacy licenses.* Our pet health business, which includes the sale and delivery of prescription pet medications is generally governed by state laws and state regulations, and with respect to controlled substances, also by federal law. Governmental authorities that regulate our business have broad latitude to make, interpret, and enforce the laws and regulations that govern us. Since our pharmacy is located in the State of Florida, the Company is governed by the laws and regulations of the State of Florida. Each prescription pet medication sale we make is likely also to be covered by the laws of the state where the customer is located. The laws and regulations relating to the sale and delivery of prescription pet medications vary from state to state, but generally require that prescription pet medications be dispensed with the authorization from a prescribing veterinarian. Our current home-state license with the Florida Board of Pharmacy is valid until February 28, 2027, and PetCareRx’s home-state license in the State of New York is valid until April 30, 2028, however, there is no guarantee that we will be able to renew such licenses when required. To the extent that we are unable to maintain our license as a community pharmacy with the Florida Board of Pharmacy (and to the extent we are unable to maintain PetCareRx’s license in New York), or if we do not maintain the licenses granted by other state boards, or if we become subject to actions by the FDA, or other enforcement regulators, our dispensing of prescription medications to pet owners could cease, which could have a material adverse effect on our operations. The expansion of our business into the offer and sale of pet insurance products also subjects us to additional laws and regulations regarding those activities, including as a registered insurance distributor in states in which we offer and sell co-branded pet insurance products and otherwise complying with state and federal laws relating to the sale and distribution of insurance products. The Company is a party to routine litigation and administrative complaints incidental to its business. Management does not believe that the resolution of any or all of such routine litigation and administrative complaints is likely to have a material adverse effect on the Company’s financial condition or results of operations. While we make every effort to fully comply with all applicable state rules, laws, and regulations, from time to time we have been the subject of administrative complaints regarding the authorization of prescriptions prior to shipment. We cannot assure you that we will not be the subject of administrative complaints in the future. We cannot guarantee you that we will not be subject to reprimands, sanctions, probations, or fines, or that one or more of our pharmacy licenses will not be suspended or revoked. If we were unable to maintain our license as a community pharmacy in the States of Florida or New York, or if we are not granted licensure in a state that begins to require licensure, or if one or more of the licenses granted by other state boards should be suspended or revoked, our ability to continue to sell prescription medications and to continue our business as it is presently conducted could be in jeopardy. ### Business Risks *Our failure to properly manage our inventory may result in excessive inventory carrying costs, or inadequate supply of products, which could materially adversely affect our financial condition and results of operations.* Our current product line contains approximately 10,000 SKUs including the SKUs acquired in our acquisition of PetCareRx. A significant portion of PetMeds sales is attributable to products representing approximately 100 SKUs, including the most popular flea and tick, and heartworm preventative brands. We need to properly manage our inventory to provide an adequate supply of these products and avoid excessive inventory of the products representing the balance of the SKUs. We generally place orders for products with our suppliers based upon our internal estimates of the amounts of inventory we will need to fill future orders. These estimates may be significantly different from the actual orders we receive. In the event that subsequent orders fall short of original estimates, we may be left with excess inventory. Significant excess inventory could result in price discounts, increased inventory carrying costs, and obsolescence. Similarly, if we fail to have an adequate supply of some SKUs, we may lose sales opportunities. We cannot guarantee that we will maintain appropriate inventory levels. Any failure on our part to maintain appropriate inventory levels may have a material adverse effect on our financial condition and results of operations. *Resistance from veterinarians to authorize prescriptions, or attempts or efforts by veterinarians to discourage pet owners from purchasing from us could cause our sales to decrease and could materially adversely affect our financial condition and results of operations.* Since we began our operations, some veterinarians have resisted providing our customers with a copy of their pet’s prescription or authorizing the prescription to our pharmacy staff, thereby effectively preventing us from filling such prescriptions under state law. We have also been informed by customers and consumers that veterinarians have tried to discourage pet owners from purchasing from internet mail-order pharmacies. The laws and regulations relating to the sale and delivery of prescription pet medications vary from state to state. Although veterinarians in some states are required by law to provide a pet owner with a prescription if medically appropriate, if the number of veterinarians who refuse to authorize prescriptions should increase, or if veterinarians are successful in discouraging pet owners from purchasing from internet mail-order pharmacies, our sales could decrease, and our financial condition and results of operations may be materially adversely affected. *Significant portions of our sales are made to residents of eight states. If we should lose our pharmacy license in one or more of these states, our financial condition and results of operations would be materially adversely affected.* While we ship pet medications to customers in all 50 states, approximately 50% of our sales for the fiscal year ended March 31, 2025, were made to customers located in the states of Florida, California, Texas, New York, Pennsylvania, North Carolina, Virginia and Georgia. If for any reason our license to operate a pharmacy in one or more of those states should be suspended or revoked, or if it is not renewed, our ability to sell prescription medications to residents of those states would cease and our financial condition and results of operations in future periods would be materially adversely affected. *We have direct buying relationships with all the major pet medication manufacturers and each contractual relationship depends on our compliance with each respective manufacturer’s minimum advertised pricing policies (MAPP).* The Company maintains direct purchasing relationships with all the major pet medication manufacturers. These relationships entitle the Company to buy directly from the manufacturer under the terms and conditions of a purchasing agreement which dictates purchase pricing of inventory and criteria to obtain additional discounts and rebates. The terms of these agreements also require the Company to comply with the manufacturers’ MAPP. Each advertisement and/or promotion of a product below the MAPP price, should they occur, would be a violation of the policy. This policy applies to all advertisements of products in all media including, without limitation, flyers, posters, coupons, mailers, inserts, newspapers, magazines, on-line catalogs, mail order catalogs, public signage and all Internet or similar electronic media, television, radio and public signage, including websites, email newsletters, forums, and auction sites. At the discretion of the manufacturers, non-compliance with the MAPP can result in one or more of the following actions: (1) forfeiture of future rebates or discounts from the manufacturer, (2) suspension of future purchases from the manufacturer, (3) or termination of current or future business relationship. The Company has and will continue to make every attempt to abide by the manufacturers MAPP. However, no assurances can be made that the Company will not violate MAPP inadvertently. A reduction or discontinuance of these rebates or discounts would increase our costs and could reduce our profitability. If any of these major pet medication manufacturers were to terminate our purchasing relationship it could materially adversely affect our business. If the manufacturers are not able to enforce their MAPP industry-wide, then our profit margins and results of operations may also be impacted negatively. #### The loss of any of our key suppliers would negatively impact our business. We have direct purchasing relationships with all of the major pet medication manufacturers, from the majority of which we purchase significant quantities of pet medication products.. We do maintain annual purchasing contracts with these major manufacturers. While we believe that our supplier relationships are good, a supplier could discontinue selling to us at any time, or stop paying cooperative fees to us at any time . The loss of any of our key suppliers of pet medications offered by us, or the loss of vendor cooperative payments, would have a negative impact on our business, financial condition, and results of operations. *Shipping is a critical part of our business and any changes in, or disruptions to, our shipping arrangements could adversely affect our business, financial condition, and results of operations.* We currently rely on third-party national, regional, and local logistics providers to deliver the products we offer on our websites. If we are not able to negotiate acceptable pricing and other terms with these providers, or if these providers experience performance problems or other difficulties in processing our orders or delivering our products to customers, it could negatively impact our results of operations and our customers’ experience. In addition, our ability to receive inbound inventory efficiently and ship merchandise to customers may be negatively affected by factors beyond our and these providers’ control, including inclement weather, fire, flood, power loss, earthquakes, acts of war or terrorism or other events, such as labor shortages and disputes, financial difficulties, volatility in the prices of fuel, gasoline and commodities such as paper and packing supplies, system failures and other disruptions to the operations of the shipping companies on which we rely. We are also subject to risks of damage or loss during delivery by our shipping vendors. If the products ordered by our customers are not delivered in a timely fashion or are damaged or lost during the delivery process, our customers could become dissatisfied and cease buying products through our websites and mobile application, which would adversely affect our business, financial condition, and results of operations. *The quality of our customer service and support is important to our customers, and if we fail to provide adequate levels of customer service and support, we could lose customers, which would harm our business.* We believe that a high level of customer care and support is critical in retaining and expanding our customer base. Although our customer care representatives participate in ongoing training programs on a variety of topics, such as product knowledge, computer usage, customer service tips, and the relationship between our Company and veterinarians, any perceived or actual decline in our customer-service response times or in the quality of our customer care representatives, even if episodic or temporary, could hurt our business. If customers perceive that our customer care and support does not compare favorably to our competitors, then we may lose customers to such competitors. *The content of our websites could expose us to various kinds of liability, which, if prosecuted successfully, could negatively impact our business.* Because we post product and pet health information and other content on our websites, we face potential liability for negligence, copyright infringement, patent infringement, trademark infringement, defamation, and/or other claims based on the nature and content of the materials we post. Various claims have been brought, and sometimes successfully prosecuted, against Internet content distributors. We could be exposed to liability with respect to the unauthorized duplication of content or unauthorized use of other parties’ proprietary technology. Although we maintain general liability insurance, our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed. Any imposition of liability that is not covered by insurance, or is in excess of insurance coverage, could materially adversely affect our financial condition and results of operations. *We may not be able to protect our intellectual property rights, and/or we may be found to infringe on the proprietary rights of others.* We rely on a combination of trademarks, trade secrets, copyright laws, and contractual restrictions to protect our intellectual property rights. These afford only limited protection. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy our proprietary property, including our non-prescription private label or generic equivalents, when and if developed, as well as aspects of our sales formats, or to obtain and use information that we regard as proprietary, including the technology used to operate our websites and our content, and our trademarks. Litigation or proceedings before the United States Patent and Trademark Office or other bodies may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets and domain names, or to determine the validity and scope of the proprietary rights of others. Any litigation or adverse proceeding could result in substantial costs and diversion of resources and could seriously harm our business and operating results. Third parties may also claim infringement by us with respect to past, current, or future technologies or intellectual property. We expect that participants in our market will be increasingly involved in infringement claims as the number of services and competitors in our industry segment grows. Any claim, whether meritorious or not, could be time-consuming, result in costly litigation, cause service upgrade delays, or require us to enter into royalty or licensing agreements. These royalty or licensing agreements might not be available on terms acceptable to us or at all. *If we are unable to protect our Internet addresses or to prevent others from using Internet addresses that are confusingly similar, our business may be adversely impacted.* Our Internet addresses, including; *www.1800petmeds.com, www.1888petmeds.com, www.petmedexpress.com, www.petmed.com, www.petmeds.com, www.petmeds.pharmacy, www.petmed.pharmacy, www.1800petmeds.pharmacy,* and *petcarerx.com*, are critical to our brand recognition and our overall success. If we are unable to protect these Internet addresses, our competitors could capitalize on our brand recognition. There may be similar Internet addresses used by competitors. Governmental agencies and their designees generally regulate the acquisition and maintenance of Internet addresses. The regulation of Internet addresses in the United States and in foreign countries has changed and may undergo further change in the near future. Furthermore, the relationship between regulations governing Internet addresses and laws protecting trademarks and similar proprietary rights is unclear. Therefore, we may not be able to protect our own Internet addresses or prevent third parties from acquiring Internet addresses that are confusingly similar to, infringe upon, or otherwise decrease the value of our Internet addresses. *Since most of our operations are housed in a single location, we are more susceptible to a business interruption in the event of damage to, or disruptions in, our facility, particularly with respect to extreme weather events.* The PetMeds headquarters and principal distribution center are currently located in one location in South Florida, and most of our shipments of products to our customers are made from this primary distribution center. Our PetcareRx principal distribution center is located in one location in New York. Because we consolidate our operations for each brand in one location, we are more susceptible to power and equipment failures, and business interruptions in the event of fires, floods, and other natural disasters than if we had additional locations. Furthermore, because our largest distribution center is located in South Florida, which is a hurricane-sensitive area and is susceptible to sea-level rise, we are particularly susceptible to the risk of damage to, or total destruction of, our headquarters and distribution center and surrounding transportation infrastructure caused by a hurricane or rising sea levels. Additionally, intense weather conditions may cause property insurance premiums to significantly increase in the future. We recognize that the frequency and intensity of extreme weather events, sea-level rise, and other climatic changes may continue to increase and, as a result, our exposure to these events may increase. We cannot assure you that we are adequately insured to cover the amount of any losses relating to any of these potential events, including business interruptions resulting from damage to or destruction of our headquarters and distribution centers, or power and equipment failures relating to our call center or websites, or interruptions or disruptions to major transportation infrastructure, or other events that do not occur on our premises. The occurrence of one or more of these events could adversely impact our ability to generate revenues in future periods. *A failure or misuse of our information systems and customer-facing technology systems, including our online payment methods, could adversely affect our results of operations, expose us to third-party claims, or increase our exposure to fraud and other risks.* Our business is dependent upon the efficient operation of our information systems. In particular, we rely on our information systems to effectively manage our business model strategy, with tools to track and manage sales, inventory, marketing, customer service efforts, the preparation of our consolidated financial and operating data, credit card information, and customer information. The failure of our information systems to perform as designed or the failure to maintain and enhance or protect the integrity of these systems could disrupt our business operations, adversely impact sales and the results of operations, expose us to customer or third-party claims, or result in adverse publicity. Through our information technology, we are able to provide an improved overall shopping and interconnected retail experience that empowers our customers to shop and interact with us from computers, tablets, smartphones and other mobile devices. We use our websites and our mobile application both as sales channels for our products and also as methods of providing product and other relevant information to our customers to drive online sales. Our online programs, communities and knowledge center allow us to inform, assist and interact with our customers. We also continually seek to enhance all of our online properties to provide an attractive user-friendly interface for our customers. Disruptions, failures or other performance issues with these customer-facing technology systems could impair the benefits that they provide to our online business and negatively affect our relationship with our customers. Further, we currently accept payments using a variety of different payment methods which may subject us to additional regulations and compliance requirements, and may also increase our exposure to fraud, criminal activity, and other risks. In the future, as technology develops and we begin to offer new payment options to consumers, including by integrating emerging mobile and other payment methods, we may be subject to additional regulations, compliance requirements, or fraud. If we fail to comply with the rules or requirements of any provider of a payment method we accept, if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, we may, among other things, be subject to fines or higher transaction fees and may lose, or face restrictions placed upon, our ability to accept credit card payments from consumers or facilitate other types of online payments. If any of these events were to occur, our business, financial condition, and results of operations could be materially and adversely affected. *Our failure or the failure of third-party service providers to protect our websites, networks, and systems against cybersecurity incidents, or otherwise to protect our confidential information, could damage our reputation and brands and substantially harm our business, financial condition, and results of operations.* As a result of our services being web based, we collect, process, transmit and store large amounts of data about our customers, employees, suppliers and others, including credit card information and personally identifiable information, as well as other confidential and proprietary information. We also employ third-party service providers for a variety of reasons, including storing, processing and transmitting proprietary, personal and confidential information on our behalf. While we rely on tokenization solutions licensed from third parties in an effort to securely transmit confidential and sensitive information, including credit card numbers, advances in computer capabilities, new technological discoveries or other developments may result in the whole or partial failure of these solutions to protect confidential and sensitive information from being breached or compromised. Similarly, our security measures, and those of our third-party service providers, may not detect or prevent all attempts to hack our systems or those of our third-party service providers. Distributed Denial-of-Service ("DDoS") attacks, viruses, malicious software, break-ins, phishing attacks, ransomware, social engineering, security breaches or other cybersecurity incidents and similar disruptions that may jeopardize the security of information stored in or transmitted by our websites, networks and systems or that we or our third-party service providers otherwise maintain, including payment card systems, may subject us to fines or higher transaction fees or limit or terminate our access to certain payment methods. We and our service providers may not anticipate or prevent all types of attacks until after they have already been launched, and techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers. In addition, cybersecurity incidents can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or by persons with whom we have commercial relationships. Breaches of our security measures or those of our third-party service providers or any cybersecurity incident could result in unauthorized access to our websites, networks and systems; unauthorized access to and misappropriation of consumer and/or employee information, including personally identifiable information, or other confidential or proprietary information of ourselves or third parties; viruses, worms, spyware or other malware being served from our websites, networks or systems; deletion or modification of content or the display of unauthorized content on our websites; interruption, disruption or malfunction of operations; costs relating to cybersecurity incident remediation, deployment of additional personnel and protection technologies, response to governmental investigations and media inquiries and coverage; engagement of third party experts and consultants; litigation, regulatory action and other potential liabilities. If any of these cybersecurity incidents occur, or there is a public perception that we, or our third-party service providers, have suffered such a breach, or we are unable to determine materiality within a reasonable timeframe under the new Cybersecurity rules, our reputation and brands could also be damaged and we could be required to expend significant capital and other resources to alleviate problems caused by such cybersecurity incidents. As a consequence, our business could be materially and adversely affected and we could also be exposed to litigation and regulatory action and possible liability. In addition, any party who is able to illicitly obtain a customer’s password could access the customer’s transaction data or personal information. Any compromise or breach of our security measures, or those of our third-party service providers, or our failure to protect our customer's confidential information and data, could violate applicable privacy, data security and other laws, and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have a material adverse effect on our business, financial condition, and results of operations. The costs of mitigating cybersecurity risks are significant and are likely to increase in the future. These costs include, but are not limited to, retaining the services of cybersecurity providers; compliance costs arising out of existing and future cybersecurity, data protection and privacy laws and regulations; and costs related to maintaining redundant networks, data backups and other damage-mitigation measures. We currently carry cyber insurance, which may mitigate certain potential losses. *Our migration of data and systems to a new information technology platform may disrupt our operations.* As an established web-based seller of pet products, we rely on a combination of legacy public-facing websites, internal applications and services, and back-end business intelligence systems. We are in the process of migrating and upgrading many of our platforms and applications to more modular, web-based and SaaS systems. If we are not able to realize the anticipated benefits of our migration to this new infrastructure, our business could be harmed. There may be unforeseen issues as a result of these migrations that may cause disruptions to the availability of our products due to service outages, downtime or other similar issues that could harm our business. We also may be subject to additional risk of cybersecurity breaches or other improper access to our data or confidential information following our migration to these new computing platforms. In addition, our new platforms may operate differently than anticipated when introduced or when new versions or enhancements are released. As we increase our reliance on our systems, our exposure to damage from service interruptions may increase. Further, our transition could involve significant time and expense and could negatively impact our ability to deliver our products and services, which could harm our financial condition and results of operations. *Our marketing, e-commerce, and other business activities are subject to a variety of federal and state laws and regulations relating to privacy, data protection, marketing and advertising and consumer protection, many of which may evolve or expand beyond their current scope, and our failure to comply with this complex set of evolving laws and regulations could adversely affect our business, financial condition, and results of operations.* We collect, maintain, use, and share personal information provided to us through our various marketing activities, including email and social media marketing and postal mailings, as well as other consumer, employee, and business-to-business interactions, in order to provide a better experience for our customers, employees, and vendors. Our current and future marketing and advertising practices depend on our ability to collect, maintain, use, and share this personal information with certain service providers and other third-party vendors, and we are subject to various federal and state laws and regulations that govern such marketing and advertising practices. In addition, we also collect, store, and transmit employees’ health information for certain reasons, such as administering employee benefits; accommodating disabilities and injuries; complying with public health requirements; and maintaining employee safety in the workplace. Laws and regulations relating to privacy, data protection, cybersecurity, marketing and advertising, and consumer protection are evolving and subject to potentially differing interpretations. While we strive to comply with all such regulations and believe that we are good stewards of our customers’ data, this area is rapidly evolving, and it is possible that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices. If so, we may be subject to proceedings or actions against us by governmental entities or others, and we may suffer damage to our reputation as a result of such proceedings or actions. We may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy, data protection, cybersecurity or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business. Federal and state governmental authorities continue to evaluate the privacy implications inherent in the use of third-party “cookies” and other methods of online tracking for behavioral advertising and other purposes. The U.S. government and state governments have enacted, have considered or are considering enacting, legislation or regulations that could significantly restrict the ability of companies and individuals to engage in these activities, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tracking tools or the use of data gathered with such tools. Additionally, some providers of consumer devices and web browsers have implemented, or announced plans to implement, means to make it easier for Internet users to prevent the placement of cookies or to block other tracking technologies, which could result in the use of third-party cookies and other methods of online tracking becoming significantly less effective. The regulation of the use of these cookies and other current online tracking and advertising practices or a loss in our ability to make effective use of services that employ such technologies could increase our costs of operations and limit our ability to acquire new customers on cost-effective terms and consequently, materially and adversely affect our business, financial condition, and results of operations. In addition, various federal and state legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection, cybersecurity, consumer protection, and advertising. For example, in June 2018, the State of California enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which became effective on January 1, 2020. The CCPA requires companies that process information of California residents to make new disclosures to consumers about their data collection, use and sharing practices, and allows consumers to opt out of selling their data to third parties and provides a new cause of action for data breaches. Further, on November 3, 2020, the California Privacy Rights Act (the “CPRA”) was voted into law by California residents. The CPRA significantly amends the CCPA, and imposes additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data. It also creates a new California data protection agency specifically tasked to enforce the law, which could result in increased regulatory scrutiny of businesses conducting activities in California in the areas of data protection and security. The substantive requirements for businesses subject to the CPRA went into effect on January 1, 2023, and will be enforced effective from July 1, 2023. Other states in which we operate have also enacted laws similar to CPRA and similar laws have been proposed in other states and at the federal level, and if passed, such laws may have potentially conflicting requirements that would make compliance challenging. Additionally, the Federal Trade Commission (the “FTC”) and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination and security of data. Consumer protection laws require us to publish statements that describe how we handle personal data and choices individuals may have about the way we handle their personal data. If such information that we publish is considered untrue, we may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences. Further, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal data secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. Each of these privacy, security, and data protection laws and regulations, and any other such changes or new laws or regulations, could impose significant limitations, require changes to our business, impose fines and other penalties or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct. Any such changes could compromise our ability to develop an adequate marketing strategy and pursue our growth strategy effectively, which, in turn, could adversely affect our business, financial condition, and results of operations. *We face the risk of litigation resulting from unauthorized text messages sent in violation of the Telephone Consumer Protection Act.* We send short message service, or SMS, text messages to customers and job candidates. The actual or perceived improper sending of text messages may subject us to potential risks, including liabilities or claims relating to consumer protection laws. For example, the Telephone Consumer Protection Act of 1991, a federal statute that protects consumers from unwanted telephone calls, faxes, and text messages, restricts telemarketing and the use of automated SMS text messages without proper consent. Numerous class-action suits under federal and state laws have been filed in recent years against companies who conduct SMS texting programs, with many resulting in multi-million-dollar settlements to the plaintiffs. Federal or state regulatory authorities or private litigants may claim that the notices and disclosures we provide, form of consents we obtain, or our SMS texting practices are not adequate or violate applicable law, resulting in civil claims against us. While we strive to comply with all applicable laws and regulations, the scope and interpretation of the laws that are or may be applicable to the delivery of text messages are continuously evolving and developing. If we do not comply with these laws or regulations or if we become liable under these laws or regulations, we could face direct liability, could be required to change some portions of our business model, or could face negative publicity, and our business, financial condition, and results of operations could be adversely affected as a result. Even an unsuccessful challenge of our SMS texting practices by our customers, regulatory authorities, or other third parties could result in negative publicity and could require a costly response from and defense by us. *Our operating results are difficult to predict and may fluctuate, and a portion of our sales are seasonal.* Factors that may cause our operating results to fluctuate include: - Our ability to obtain new customers at a reasonable cost, retain existing customers, or encourage reorders; - Our ability to increase the number of visitors to our websites, or our ability to convert visitors to our websites into customers; - The mix of medications and other pet products sold by us; - Our ability to manage inventory levels or obtain an adequate supply of products; - Our ability to adequately maintain, upgrade, and develop our websites, the systems that we use to process customers’ orders and payments, or our computer network; - Increased competition within our market niche; - Price competition; - New products introduced to the market, including generics; - Increases in the cost of advertising; - The amount and timing of operating costs and capital expenditures relating to expansion of our product line or operations; - Potential disruption to the distribution network; - Disruption of our toll-free telephone service, technical difficulties, or systems and Internet outages or slowdowns; - The impact of further outbreaks of COVID-19, and any future similar outbreak, on our business operations and generally on the economy, including the measures taken by governmental authorities to address it; - Unfavorable general economic trends; and - Tariffs Our annual and quarterly operating results have fluctuated in the past and may fluctuate significantly in the future due to a variety of factors, including weather, many of which are out of our control. Any change in one or more of these factors could materially adversely affect our financial condition and results of operations in future periods. *Uncertainties in economic conditions and their impact on consumer spending patterns could adversely impact our business, financial condition, and results of operations.* Our results of operations are sensitive to changes in certain macro-economic conditions that impact consumer spending on pet products and services. Some of the factors that may affect consumer spending on pet products and services include consumer confidence, levels of unemployment, inflation, interest rates, tax rates and general uncertainty regarding the overall future economic environment. We may experience declines in sales or changes in the types of products sold during economic downturns. Any material decline in the amount of consumer spending or other adverse economic changes could reduce our sales, and a decrease in the sales of higher-margin products could reduce profitability and, in each case, harm our business, financial condition, and results of operations. *We have grown, and continue to seek to grow our business through acquisitions of, or investments in, new or complementary businesses, facilities, technologies, offerings, or products, or through strategic alliances, and the failure to manage these acquisitions, investments, or other strategic alliances, or to integrate them with our existing business, could have a material adverse effect on us.* During the past two years, we acquired one company (PetCareRx) and entered into a strategic partnership to enable us to offer telehealth services to our customers. We expect that we may in the future consider additional opportunities to acquire or make investments in new or complementary businesses, facilities, technologies, offerings, or products, or enter into other strategic alliances, which may enhance our capabilities, complement our current products and services or expand the breadth of our markets. Acquisitions, investments and other strategic alliances, involve numerous risks, including: - problems integrating the acquired business, facilities, technologies or products, including issues maintaining uniform standards, procedures, controls and policies; - unanticipated costs associated with acquisitions, investments or strategic alliances; - losses we may incur as a result of declines in the value of an investment or as a result of incorporating an investee’s financial performance into our financial results; - diversion of management’s attention from our existing business; - risks associated with entering new markets in which we may have limited or no experience; - the risks associated with businesses we acquire or invest in, which may differ from or be more significant than the risks our other businesses face; - potential unknown liabilities associated with a business we acquire or in which we invest; and - increased legal and accounting compliance costs. Our ability to successfully grow through strategic transactions depends upon our ability to identify, negotiate, complete and integrate suitable target businesses, facilities, technologies, products and services. These efforts could be expensive and time-consuming and may disrupt our ongoing business and prevent management from focusing on our operations. Also, our acquisitions may not result in the benefits or growth originally anticipated from such acquisitions. As a result of future strategic transactions, we might need to issue additional equity securities, spend our cash, or incur debt (which may only be available on unfavorable terms, if at all) or contingent liabilities, any of which could reduce our profitability and harm our business. If we are unable to identify suitable acquisitions, investments or strategic relationships, or if we are unable to integrate any acquired businesses, facilities, technologies, offerings and products effectively, our business, financial condition, and results of operations could be materially and adversely affected. Also, while we employ several different methodologies to assess potential business opportunities, the new businesses or investments may not meet or exceed our expectations or desired objectives in the timeframe expected. *The market for pet telemedicine is immature and uncertain. If the telemedicine market does not develop, develops more slowly than we expect, or encounters negative publicity, or if our approach does not achieve a high level of customer acceptance, the growth and results of our partnership with Vetster may be adversely affected which could result in an impairment of our investment.* It is uncertain whether the telemedicine market and our approach to pet telehealth with our partners in that industry will achieve and sustain high levels of demand, consumer acceptance and market adoption. The COVID-19 pandemic increased acceptance and utilization of telemedicine services, but it is uncertain whether such increase in demand will continue. Demand for pet telemedicine and telehealth services is affected by a number of factors, many of which are beyond our control. Some of these potential factors include: - market adoption and ongoing usage of pet telehealth and telemedicine services and solutions; - awareness and adoption of technology in healthcare generally; - availability of products and services that compete with ours; - ability to maintain and expand a network of qualified providers; - ease of adoption and use; - features and platform experience; - performance; - brand; - security and privacy; and - pricing. Our success will depend to a substantial extent on the willingness of our customers to use, and to increase the frequency and extent of their utilization of, our solution being offered in conjunction with our telehealth partners as well as on our ability to demonstrate the value of pet telehealth and telemedicine to veterinarians and pet owners. Negative publicity concerning the pet telehealth and telemedicine market could limit market acceptance of our solutions and services. *Evolving foreign trade policy by the United States or other countries or the imposition of tariffs on imported goods may affect our business.* Some of the products that we offer are purchased from vendors located outside of the United States and other vendors that we purchase from depend on other vendors located outside of the United States. These threatened or imposed tariffs and any retaliatory actions taken by other countries could result in us incurring additional costs to procure some of the merchandise we offer and may require us to raise prices on certain products. While the scope and duration of any current or future tariffs remain uncertain, tariffs imposed by the U.S. or other governments could negatively impact our financial condition and results of operations. ### Financial Risks *We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business.* We accept payments using a variety of methods, including credit and debit cards, PayPal and Apple Pay, and we may offer new payment options over time. Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. These requirements may change over time or be reinterpreted, making compliance more difficult or costly. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, and other forms of electronic payment. If these companies become unable to provide these services to us, or if their systems are compromised, it could potentially disrupt our business. The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in the payment systems. If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a breach or misuse of data, we may be liable for costs incurred by payment card issuing banks and other third parties or subject to fines and higher transaction fees, or our ability to accept or facilitate certain types of payments may be impaired. As a result, our business and operating results could be adversely affected. *We have identified material weaknesses in our internal controls over financial reporting, and management has determined that our disclosure controls and procedures were not effective as of the end of the period covered by this Annual Report on* *Form 10-K. Our business and share price may be adversely affected if we fail to implement and maintain effective disclosure controls and procedures and internal control over financial reporting.* For the periods ended March 31, 2024 and 2025, our management identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The material weakness identified in our internal control over financial reporting as of March 31, 2025, as well as our remediation plans, are described in Part II, Item 9A, “Controls and Procedures.” While we believe these efforts will be sufficient to remediate the material weakness, we cannot provide assurance that we will be able to complete our evaluation, testing or any required remediation in a timely fashion, or at all. The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error and the risk of fraud. Because of the inherent limitations in a cost-effective control system, misstatements in our financial statements due to error or fraud may occur and require restatement, such as those errors that resulted in the restatement of our previously issued audited consolidated financial statements described in this Comprehensive Form 10-K, Amendment No.1 on Form 10-K/A to our Annual Report on Form 10-K for the year ended March 31, 2023 (the “2023 Form 10-K/A”), and the restatement of our previously issued unaudited condensed consolidated financial statements described in Amendment No.1 on Form 10-Q/A to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the “2024 Q1 Form 10-Q/A”) and Amendment No.1 on Form 10-Q/A to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (the “2024 Q2 Form 10-Q/A”, and together with the 2024 Q1 Form 10-Q/A and 2023 Form 10-K/A, the “Amended Reports”) as well as fiscal 2023 amounts restated in our Quarterly Report on Form 10-Q for the three and nine months ended December 31, 2023. The material weaknesses in our internal control over financial reporting will not be considered remediated until the controls operate for a sufficient period and management has concluded through testing that these controls operate effectively. If we are unable to remediate the material weaknesses or identify additional material weakness in the future, we may be unable to accurately report our financial results, which could cause our financial results to be materially misstated and require restatement. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements. Ineffective disclosure controls and procedures and internal control over financial reporting could also result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor confidence, harm to our reputation and financial condition, diversion of financial and management resources from the operation of our business, and the market price of our common stock may decline as a result. We cannot assure you that the remediation measures we have taken to date, or any measures that we may take in the future, will be sufficient to avoid future material weaknesses. *We may face litigation and other risks as a result of the restatements described in this Comprehensive Form 10-K and the Amended Reports and material weaknesses in our internal control over financial reporting.* We have identified material weaknesses in our internal control over financial reporting, including in connection with the restatements described in this Comprehensive Form 10-K and the Amended Reports. As a result of such material weaknesses and the restatement, we could face regulatory action by the SEC or other regulatory authorities, potential litigation, or other disputes, including claims invoking federal and state securities laws, contractual claims or other claims arising from the restatement and the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. Any such litigation or dispute, whether successful or not, could adversely affect our business, financial condition, and results of operations. ### Risks Relating to Taxes *Taxing authorities may successfully assert that we should have collected, or in the future should collect, sales and use, value added, or similar taxes, and any such assessments could adversely affect our business, financial condition, and results of operations.* In the past several years, states have adopted laws that attempt to impose tax collection obligations on out-of-state companies. In 2018, the Supreme Court of the United States ("Supreme Court") ruled in South Dakota v. Wayfair, Inc. et al, or Wayfair, that online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s state. In response to Wayfair, or otherwise, states or local governments may adopt, or begin to enforce, laws requiring us to register, calculate, collect, and remit taxes on sales in their jurisdictions. Additionally, states and some local tax jurisdictions have differing rules and regulations governing sales and use taxes, which are subject to varying interpretations that may change over time. One or more taxing authorities could seek to impose additional sales and use, value added, or similar taxes on us or may determine that such taxes should have, but have not been, paid by us. Any successful action by taxing authorities to compel us to collect and remit such taxes, either retroactively or prospectively, could have a material adverse effect on our business, financial condition and results of operations. The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors, and decrease our future sales, which could have a material adverse effect on our business and results of operations. While we believe that we currently collect and remit applicable sales taxes to the extent required in all states in which we sell, a successful assertion by one or more states seeking to tax us on sales that occurred in prior tax years, or to collect more taxes in a jurisdiction in which we currently do collect some taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest. New legislation or regulations, the application of laws and regulations from jurisdictions, or the application of existing laws and regulations to the Internet and commercial online services could similarly result in significant additional taxes on our business. For instance, the Supreme Court’s decision and the enactment and enforcement of laws resulting therefrom could also impact where we are required to file state income taxes. As a result, our effective income tax rate as well as the cost and growth of our business could be materially and adversely affected, which could in turn have a material adverse effect on our financial condition and results of operations. In addition, because the Company’s products and services are available over the Internet, states may claim that the Company is required to do business as a foreign corporation in one or more of those jurisdictions. Failure to qualify as a foreign corporation in a jurisdiction where the Company is required to do so could subject it to taxes and penalties, and such jurisdictions may charge the Company with violations of local laws. *Changes in tax laws or regulations in the various tax jurisdictions we are subject to could increase our cost of doing business.* We may be subject to additional tax liabilities and penalties resulting from new legislation or regulations; changes in taxing jurisdictions’ administrative interpretations, decisions, policies and positions; results of tax audits, examinations, settlements or judicial decisions; changes in accounting principles, as well as the evaluation of new information that results in a change to a tax position taken in a prior period; and changes to our business operations, including acquisitions. Any resulting increase in our tax obligation or cash taxes paid could adversely affect our cash flows and financial results. ### Industry Risks *We face significant competition from veterinarians and online and traditional retailers, as well as challenges from strategic alliances amongst our competitors, and may not be able to compete profitably with them.* We compete directly and indirectly with veterinarians for the sale of pet medications and other health products. Veterinarians hold a competitive advantage over us because many pet owners may find it more convenient or preferable to purchase these products directly from their veterinarians at the time of an office visit. We also compete directly and indirectly with both online and traditional retailers. Both online and traditional retailers may hold a competitive advantage over us because of longer operating histories, established brand names, greater resources, and/or an established customer base. Online retailers may have a competitive advantage over us because of established affiliate relationships to drive traffic to their website. Traditional retailers may hold a competitive advantage over us because pet owners may prefer to purchase these products from a store instead of online. In addition, we face growing competition from online and multichannel retailers, some of whom may have a lower cost structure than ours, as customers now routinely use computers, tablets, smartphones, and other mobile devices and mobile applications to shop online and compare prices and products in real time. In order to effectively compete in the future, we may be required to offer promotions and other incentives, which may result in lower operating margins and adversely affect the results of operations. We also face a significant challenge from our competitors forming alliances with each other, such as those between online and traditional retailers. These relationships may enable both their online and retail stores to negotiate better pricing and better terms from suppliers by aggregating the demand for products and negotiating volume discounts, which could be a competitive disadvantage to us. *Product recalls and concerns regarding the safety and quality of the pet products we sell could affect our business.* We are subject to laws and regulations by various federal and state regulatory authorities regarding the safety and quality of the pet products that we sell. We purchase products from various suppliers, one or more of which might not adhere to product safety requirements or our quality control standards, and we may not be able to identify the deficiency before merchandise ships to our customers. All of our suppliers are required to comply with applicable product safety laws, and we are dependent upon them to ensure such compliance. Any issues of product safety or allegations that the products we sell are in violation of governmental regulations, including, but not limited to, issues involving products manufactured in foreign countries or issues of mislabeling or adulteration, could cause those products to be recalled. If our suppliers fail to manufacture or import merchandise that adheres to our quality control standards, product safety requirements, or applicable governmental regulations, our reputation and brands could be damaged, potentially leading to decreased sales or increases in customer litigation against us. If consumers lose confidence in the safety and quality of the food or other products that we sell or in the suppliers that provide such products, then our sales could be adversely affected. Adverse publicity about these types of concerns, even if not valid, may discourage consumers from buying the products we offer, and such publicity cause disruptions with suppliers. The real or perceived sale of contaminated food products by us could result in product liability claims against our suppliers or us, expose us or our suppliers to governmental enforcement action or private litigation, or lead to costly recalls and a loss of consumer confidence, any of which could have an adverse effect on our business, financial condition, and results of operations. We may also in the future voluntarily recall or withdraw products that we consider do not meet our standards in order to protect our brands and reputation. While we carry product liability insurance, our insurance may not be adequate to cover all liabilities that we may incur in connection with product liability claims. In addition, we may be unable to continue to maintain our existing insurance coverage or obtain comparable insurance at a reasonable cost, if at all, or secure additional coverage, which may result in future product liability claims being uninsured. Any of these factors could negatively impact our business, financial condition, and results of operations. *Pandemics or other health crises, such as the possible resurgence of the COVID-19 pandemic, may adversely affect our results of operations.* The outbreak and global spread of the COVID-19 pandemic, including the spread of recent variants, and related containment efforts created, and may continue to contribute to, significant economic disruption in the United States and around the world. A resurgence of the COVID-19 pandemic, variations of the COVID-19 virus, or other pandemics could adversely affect our business operations. It is impossible to predict the effect and ultimate impact of the possible resurgence of the COVID-19 pandemic, a variation of the COVID-19 virus, or other pandemic. In response to the COVID-19 pandemic, we implemented working from home where possible and enhanced disinfection and social distancing within our workplace. Future COVID-19 surges or variants, as well as other pandemics, may result in us again encouraging employees to work from home, which could adversely impact costs, operations, and morale, as well as result in consumer privacy, IT security, and fraud concerns. Governmental lockdowns and other restrictions at the onset of the COVID-19 pandemic negatively impacted, and in the event of a future resurgence or a different pandemic or health crisis may again negatively impact, the operations of and ability to ship from our fulfillment center. Our future results of operations and overall financial performance could be uncertain should a new virus strain of COVID-19, a new pandemic, or other health crisis occur. ### Securities Risks *Our stock price fluctuates from time to time and may fall below expectations of securities analysts and investors, and could subject us to litigation, which may result in you suffering a loss on your investment.* The market price of our common stock may fluctuate significantly in response to a number of factors, many of which are out of our control. These factors include: changes in accounting treatments or principles; announcements by our competitors of new products and services offerings; significant contracts, acquisitions, or strategic relationships; additions or departures of key personnel; any future sales of our common stock or other securities; stock market price and volume fluctuations of publicly traded companies; and general political, economic, and market conditions. In some future quarter our operating results may fall below the expectations of securities analysts and investors, which could result in a decrease in the trading price of our common stock. In addition, if the Company fails to meet expectations related to future growth, profitability, dividends, or other market expectations, the price of the Company’s common stock may decline significantly, which could have a material adverse impact on investor confidence and employee retention. In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. We may be the target of similar litigation in the future. Securities litigation could result in substantial costs and divert management's attention and resources, which could seriously harm our business and operating results. *We may issue additional shares of preferred stock that could defer a change of control or dilute the interests of our common shareholders. Our charter documents could defer a takeover effort which could inhibit your ability to receive an acquisition premium for your shares.* Our charter permits our Board of Directors to issue up to 5.0 million shares of preferred stock without shareholder approval. Currently there are 2,500 shares of our Convertible Preferred Stock issued and outstanding. This leaves slightly less than 5.0 million shares of preferred stock available for issuance at the discretion of our Board of Directors. These shares, if issued, could contain dividend, liquidation, conversion, voting, or other rights which could adversely affect the rights of our common shareholders and which could also be utilized, under some circumstances, as a method of discouraging, delaying, or preventing a change in control. Provisions of our articles of incorporation, bylaws and Florida law could make it more difficult for a third party to acquire us, even if many of our shareholders believe it is in their best interest. *Actions of activist stockholders could be disruptive and costly and could adversely affect our results of operations, financial condition, and/or share price* While we strive to maintain constructive communications with our stockholders, we may, from time to time, be subject to demands from activist stockholders. Any activist campaign against the Company that contests, conflicts with, or seeks to change, our board composition, leadership, strategic direction, or business mix could have an adverse effect on us because: (i) responding to actions by activist stockholders could disrupt our operations, be costly or time-consuming, or divert the attention of our board of directors and senior management from their regular duties, which could adversely affect our results of operations or financial condition; (ii) perceived uncertainties as to our future direction, including as a result of possible changes to the composition of our board, may lead to the perception of a change in the direction of the business or lack of continuity, any of which may be exploited by our competitors, cause concern to our customers, employees, and/or business partners and result in the loss of potential business opportunities, or make it more difficult to attract and retain qualified personnel and business partners, and may adversely affect our relationships with vendors, customers, business partners, and other third parties; (iii) these types of actions could cause significant fluctuations in our share price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business; and (iv) if individuals are elected to our board of directors with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and create additional value for our stockholders. *Our ability to pay regular dividends to our shareholders and the amounts of any such dividends are subject to the discretion of the Board and may be limited by our financial condition, or limitations under Florida law.* We paid regular dividends to our shareholders from 2009 to August 2023, and on February 1, 2024, our Board of Directors elected to suspend the quarterly dividend indefinitely. The Board of Directors determined to reserve and/or utilize cash resources that would otherwise be available for distributions in order to fund additional strategic transactions or investments in our business. The determination to pay dividends and the amounts thereof in the future will be at the discretion of the Board and will be dependent on then-existing conditions, including our financial condition, income, legal requirements, including limitations under Florida law, and other factors the Board deems relevant. For these reasons, shareholders should not rely on dividends to receive a return on investment. Accordingly, and for the foreseeable future, realization of any gain on shares of our common stock will depend solely on the appreciation of the price of our common stock, which may not occur. ## Cybersecurity As filed, 4,495 characters. PetMed Express, Inc. (“PetMeds”) and PetCareRx maintains an enterprise-wide cybersecurity program designed to identify, assess, manage, and mitigate information security risks across the organization. Our program encompasses governance, policy, prevention, detection, incident response, and recovery mechanisms in alignment with industry standards. ### Cybersecurity Risk Management and Oversight Our cybersecurity risk management program is built to protect our systems, data, and customers from a wide range of cyber threats. This includes internal protocols and controls, as well as third-party oversight. Our cybersecurity practices are guided by the National Institute of Standards and Technology (NIST) CSF (Cyber Security Framework), and categorizes cybersecurity tasks into five key functions: identify, protect, detect, respond, and recover. This functional orientation helps organizations make informed decisions about reducing cyberattacks. Oversight of cybersecurity risk is formally overseen by the Audit Committee of our Board of Directors. The Audit Committee receives regular briefings from management on cybersecurity topics, including strategy, threats, incident trends, remediation activities, and updates on material developments, as appropriate. ### Incident Detection and Response We have implemented an Incident Response Policy and detailed procedures that govern how potential cybersecurity events are identified, escalated, investigated, contained, and remediated. The objectives of our incident response program include: - Timely investigation and validation of incidents - Minimization of data loss or service disruption - Evidence preservation in accordance with legal and regulatory requirements - Restoration of affected systems and services - Post-incident review and implementation of corrective actions - Notification to affected parties and regulators, where appropriate These procedures are tested and exercised periodically to ensure preparedness and adaptability. ### Security Measures and Monitoring We deploy a layered defense model using widely adopted technologies and internal solutions for threat monitoring, detection, and response. Our efforts include: - Regular system scans, vulnerability assessments, and penetration testing - Ongoing compliance with the Payment Card Industry Data Security Standard (PCI DSS) - Deployment of endpoint detection and response (EDR) tools and real-time monitoring solutions - Secure development practices and controls embedded within our digital transformation initiatives As we modernize our digital platforms and phase out legacy systems, we are embedding advanced security practices into our infrastructure. This includes improving controls around identity management, access, encryption, and software development life cycles. ### Third-Party and Vendor Risk Management Our vendor and partner management processes include security due diligence, contractually required safeguards, and—in relevant cases—direct review of their cybersecurity practices. We require certain vendors with access to sensitive systems or data to undergo security training or meet specific security certification requirements. ### Training and Awareness Cybersecurity awareness is a foundational element of our risk management approach. We conduct recurring cybersecurity training for employees across the company, with tailored modules that address evolving threat vectors such as phishing, ransomware, and social engineering. Additional targeted training is provided to users in high-risk roles. ### Cybersecurity Incidents We maintain an active process to detect and respond to cybersecurity incidents. While we have experienced routine threats and minor incidents in the normal course of operations, to date, we have not identified any cybersecurity incidents that have materially impacted our business, operations, or financial results. Nevertheless, we recognize that cybersecurity risks are dynamic and continually evolving. We cannot guarantee that future events will not have a material impact. For more information on cybersecurity-related risks, see Item 1A, “Risk Factors”, including the risk titled: “Our failure or the failure of third-party service providers to protect our websites, networks, and systems against cybersecurity incidents, or otherwise to protect our confidential information, could damage our reputation and brands and substantially harm our business, financial condition, and results of operations.” ## Properties As filed, 1,367 characters. We own our principal executive offices and distribution center, which are located at 420 South Congress Avenue, Delray Beach, Florida 33445 (the “Delray Beach Property”). The Delray Beach Property consists of approximately 634,000 square feet of land or 14.6 acres with two building complexes totaling approximately 185,000 square feet, with additional land for future use. The first building complex consists of approximately 125,000 square feet and the second building complex consists of approximately 60,000 square feet each consisting of both office and warehouse space. The Company occupies approximately 97,000 square feet of the first building for its principal offices and distribution center. As of March 31, 2025, 48% of the Delray Beach Property was leased to two tenants with a remaining weighted average lease term of 5.2 years. We believe that our facilities are sufficient for our current needs and are in good condition in all material respects. In connection with our acquisition of PetCareRx, in April 2023 we assumed the leases of two buildings occupied by PetCareRx located in Lynbrook, New York. These facilities, which aggregate approximately 32,000 square feet, are used by PetCareRx as a shipping and fulfillment center and as an executive office. The leases expire in April 2027 and include the option to renew for an additional five years. ## Legal proceedings As filed, 3,415 characters. We are involved from time to time in various claims and lawsuits in the ordinary course of business, including claims related to products, product warranties, contracts, employment, intellectual property, consumer protection, pharmacy and other regulatory matters. We have 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 us in the future. We also initiate litigation to protect our trade or service marks. There can be no assurance that we will be successful in protecting our trade or service marks. In the opinion of management, none of the claims and suits, either individually or in the aggregate, are reasonably likely to have a material adverse effect on our operations or consolidated financial statements. Legal costs related to the above matters are expensed as incurred. On April 18, 2024, Plaintiff Timothy Fitchett (“Plaintiff”) filed an action against the Company in the Court of Common Pleas of Allegheny County, Pennsylvania, on behalf of himself and on behalf of a class of others similarly situated. Plaintiff alleges that the Company violated Pennsylvania’s Unfair Trade Practices and Consumer Protection Law by representing “reg.” prices for products which the Company allegedly never charged for those products. On May 13, 2024, the Company removed the matter to the U.S. District Court for the Western District of Pennsylvania in Pittsburgh. The Company successfully opposed the Plaintiff's motion to remand the case back to the Court of Common Pleas. On the face of the Complaint, Plaintiff is seeking damages for himself in the amount of the allegedly illusory discounts he allegedly believed he was receiving when purchasing products from the Company or, in the alternative, a complete refund of amounts he paid to the Company, and he is also seeking a liability determination for members of the proposed class. The Company denies liability in this matter and intends to defend the action accordingly. The Company cannot determine materiality or estimate a range of potential liability, if any, at this time if the Company were determined to be liable. On February 14, 2025, Plaintiffs Ashley Bird, Tyler Dvornski, and Tiffany Hughes (“Plaintiffs”) filed an action in the Northern District of New York on behalf of themselves and a class of others similarly situated alleging that the Company misrepresented that its products were on sale by showing a “regular” strikethrough price, when the products were never sold for the strikethrough price. Plaintiffs allege that by using this “false reference price” or “false discount,” the Company artificially inflated its prices and charged consumers more than it otherwise could. Plaintiffs allege that these purported practices violate New York General Business Law §§ 349 and 350 as well as California’s Unfair Competition Law and California’s False Advertising Law. After the Company made a motion to dismiss the complaint, Plaintiffs filed an amended complaint. The Company notified the court that it intends to file a motion to dismiss the amended complaint. The Company denies liability in this matter and intends to defend the action accordingly. The Company cannot determine materiality or estimate a range of potential liability, if any, at this time if the Company were determined to be liable. ## Management's discussion and analysis As filed, 38,339 characters. ### Executive Summary PetMed Express, Inc. and subsidiaries, d/b/a PetMeds® (the "Company", "we", "us", or "our") is a leading nationwide direct-to-consumer pet pharmacy and online provider of prescription and non-prescription medications, foods, supplements, supplies and vet services for dogs, cats, and horses. PetMeds markets and sells directly to consumers through its websites, toll-free numbers, and mobile application. We offer consumers an attractive alternative for obtaining pet medications, foods, and supplies in terms of convenience, price, speed of delivery, and valued customer service. Founded in 1996, our executive headquarters offices are currently located at 420 South Congress Avenue, Delray Beach, Florida 33445, and our telephone number is (561) 526-4444. We have a March 31 fiscal year end. Presently, our product line includes approximately 10,000 of the most popular pet medications, health products, and supplies for dogs, cats, and horses. We market our products through national advertising campaigns which aim to increase the recognition of the “PetMeds” brand name and "PetCareRx" brand name, increase traffic on our websites at *www.petmeds.com* and *www.petcarerx.com*, acquire new customers, and maximize repeat purchases. Our sales consist of products sold mainly to retail consumers. The twelve-month average purchase increased slightly at approximately $97 and $94 per order for the fiscal years ended March 31, 2025, and March 31, 2024, respectively. Restatement As described in the Explanatory Note above and in Note 18 to our consolidated financial statements, we have restated our consolidated financial statements and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Affected Periods. ### Completion of Audit Committee Investigation On October 7, 2025, the Company publicly reported the conclusion of the previously disclosed investigation by the Audit Committee of the Company’s Board of Directors (the “Audit Committee”). As previously reported, the Company was unable to file, within the prescribed time period, its Annual Report on Form 10-K for the fiscal year ended March 31, 2025, following the commencement of an investigation by the Audit Committee that was originally disclosed in the Company’s Current Report on Form 8-K filed on July 1, 2025. The Audit Committee, assisted by outside legal counsel, Foley & Lardner LLP, and forensic accountants, BDO USA, P.C., conducted during June through August 2025 an investigation into allegations raised by two separate reports submitted anonymously through the Company’s third-party-administered whistleblower hotline on April 15 and 16, 2025 regarding (i) the timing of revenue recognition with respect to certain AutoShip orders in the fiscal fourth quarter of 2025, some of which resulted in customer complaints; (ii) a fiscal fourth quarter 2025 $50 coupon promotion to customers and whether it was motivated to any extent by its potential impact on Company KPIs regarding new customers; and (iii) the Company’s culture and control environment. The investigation’s scope also ultimately included additional matters identified during the course of the investigation. The Audit Committee’s primary investigative findings in the investigation included the following: (i) The Company accelerated shipment of products to AutoShip customers from the fourth quarter of fiscal year 2025 (i.e., the quarter ending March 31, 2025) to the third quarter of fiscal year 2025 (i.e., the quarter ending December 31, 2024) (the “December Accelerated Shipments”) and again from the first quarter of fiscal year 2026 (i.e., the quarter ending June 30, 2025) to the fourth quarter of fiscal year 2025 (i.e., the quarter ending March 31, 2025) (the “March Accelerated Shipments”). The acceleration of shipments did not comply with certain provisions of the Company’s AutoShip Terms & Conditions with their customers. As a result, the Company erroneously recorded $133,189 in revenue associated with the December Accelerated Shipments in the quarter ending December 31, 2024 of fiscal year 2025 and $1,101,151 in revenue associated with the March Accelerated Shipments in its financial statements for the quarter ending March 31, 2025. Management has corrected the March Accelerated Shipments error prior to the filing this Annual Report on Form 10-K. (ii) On March 21, 2025, the Company issued a $50 coupon with the objective of attracting new customers to its website and encouraging previous customers who had not recently placed an order to do so. When initially launched, the coupon did not contain a minimum purchase requirement, but a $100 minimum was later added after management noted excessive use of the coupon. The coupon was utilized in the placement of approximately 30,000 total orders, only approximately 74 of which had a net sale amount (sale amount less coupon value) of $0. Prior to the investigation, management had erroneously recorded in its financial statements for the quarter ending March 31, 2025, $2,451 in expenses for the 74 orders with no net sales amount to cost of goods sold rather than to marketing expense. The Audit Committee found that the inclusion of customers with zero net sales did not have a material impact on the Company’s new customer KPI. (iii) The Company’s former Chief Executive Officer, Sandra Campos, hired her nephew for a mid-level position and did not follow the Company’s employee handbook as a result of her failing to inform the Company of the family relationship at the time of her nephew’s hiring and in having the nephew report directly to her for a period of time. (iv) Although the Audit Committee did not find that the Company’s culture fostered an environment that discouraged employees from raising concerns, the Audit Committee did find that certain members of management were concerned about the speed with which business decisions were made and the lack of adequate time to evaluate them. (v) The former Audit Committee Chair (Diana Purcel) and the former Chief Financial Officer (Robyn D’Elia) did not report the whistleblower complaints (referenced above) to the Company’s external auditors on a timely basis. (vi) In April 2025, the Company accrued $711,897 for cooperative marketing funds for the fourth quarter ended March 31, 2025 believed to be due from a vendor in connection with marketing services provided by the Company pursuant to the Company’s Retail Reseller Agreement with the vendor. Based on management’s communications to clarify the amount with the vendor during the investigation, this accrual was determined to be erroneous and to have resulted from management’s misunderstanding of an oral agreement with the vendor. In August 2025, after confirming with the vendor the amounts that the vendor did agree to pay, management corrected the error prior to the filing of its financial statements by reducing its other current assets and increased marketing expense by $287,000 for the quarter ended March 31, 2025. In its investigation, the Audit Committee identified certain conduct that was determined to be inconsistent with the Company’s Code of Business Conduct & Ethics and related policies involving certain members of management. The Audit Committee referred these matters to the Board of Directors of the Company for appropriate action and discipline. The Board of Directors, as part of its remediation plan to foster a tone at the top that exemplifies a culture of commitment to the principles set forth in the Company’s Code of Business Conduct and Ethics, requested and accepted the resignations of the former Chief Executive Officer (Sandra Campos) and the former Chief Financial Officer (Robyn D’Elia) and approved and entered into mutual separation agreements with Ms. Campos and Ms. D’Elia on August 11, 2025, as reported in a Current Report on Form 8-K filed by the Company on August 12, 2025. Also, the Board of Directors requested and accepted the resignation of the former Chair of the Audit Committee (Diana Purcel), and such resignation was previously reported in the Current Report on Form 8-K filed by the Company on July 28, 2025. As a result of the findings in the investigation, the Audit Committee made a number of recommendations which the Board of Directors has adopted, including: replacement of the Chief Executive Officer, Chief Financial Officer, and Chair of the Audit Committee; implementation of additional and enhanced policies, procedures, and training on the Company’s Code of Ethics & Conduct; correction of certain accounting errors as described above; and strengthening the Company’s internal controls over financial reporting and operations related to the matters investigated. The Company has reported in Item 9A of this Annual Report on Form 10-K material weaknesses in internal controls over financial reporting in connection with the findings of the investigation. ### Restatement As described in the Note 1 of “Notes to Consolidated Financial Statements,” we have restated our consolidated financial statements and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for the years ended March 31, 2024 and 2023 and the interim periods in those years and for the quarters ended June 30, 2024, September 30, 2024, and December 31, 2024. ### Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and the results of our operations contained herein are based upon our consolidated financial statements and the data used to prepare them. Our 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. See Note (2) - Summary of Significant Accounting Policies, in the "Notes to Consolidated Financial Statements" included in Part II, Item 8, Financial Statements and Supplementary Data, of this 10-K Report for a description of our significant accounting policies as well as a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this 10-K Report. We believe that the estimates, assumptions and judgments involved in the accounting policies described below involve a significant level of estimation uncertainty and have the greatest potential impact on our financial condition and results of operations and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates, assumptions, and judgments on an ongoing basis. Our actual results may differ from these estimates under different assumptions, judgments, and conditions. Revenue recognition We account for revenue under ASC Topic 606 ("*Revenue from Contracts with Customers")* and generate revenue by selling pet medication products and pet supplies mainly to retail customers. Certain pet supplies offered on our website are drop shipped to customers. We consider ourself the principal in the arrangement because we control 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 this 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 the shipment of the product occurs. This key judgment is determined as the shipping point, which represents the point in time where we have 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 we consider ourself 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. Membership fees represent the amounts recognized periodically from two membership models. The first is the PetPlus membership for PetCareRx customers, and the second is a partner membership provided through PetCareRx. These memberships provide discounted pricing, free standard shipping, veterinary telehealth services and local Caremark Pharmacy prescription pickup which represent a single stand-ready performance obligation to provide these benefits. The PetPlus membership fee is an upfront annual charge and automatically renews one year from the initial enrollment date. The Company recognizes the revenue ratably over the term of the PetPlus membership which is generally one year. Virtually all of our sales are paid by credit cards and we usually receive the cash settlement in two to three banking days. Credit card sales minimize accounts receivable balances relative to sales. We had no material contract asset or contract liability balances as of March 31, 2025, or March 31, 2024. We maintain an allowance for credit losses that we estimate will arise from customers’ inability to make required payments, arising from either credit card chargebacks or insufficient funds checks. We determine our estimates of the uncollectability of accounts receivable by analyzing historical bad debts and current economic trends. The allowance for credit losses was approximately $91 thousand and $273 thousand at March 31, 2025 and 2024, respectively. Goodwill Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is not amortized but instead is tested for impairment annually on January 1, or more frequently if events or changes in circumstances indicate goodwill might be impaired. When testing goodwill for impairment by determining whether the carrying value of each reporting unit exceeds its estimated fair value. we have the option to choose whether it will apply a qualitative assessment first and then a quantitative assessment, if necessary, or to apply the quantitative assessment directly. We have concluded that we have one reporting unit and has assigned the entire balance of goodwill to this reporting unit. We have performed our annual goodwill impairment testing as of January 1, 2025 using a quantitative assessment and at that time concluded there was no impairment. Since January 1, 2025, our stock price decreased from $4.82 at December 31, 2024 to $4.19 at March 31, 2025. We considered the decrease in its stock price in FY 2025 to be indicative of potential risks that the carrying amount of goodwill may not be recoverable. We performed a quantitative assessment as of March 31, 2025, and concluded that goodwill was not impaired because the market capitalization, i.e. fair value determined based on our stock price (without including a control premium), of the single reporting unit exceeded its carrying value as of March 31, 2025. Accounting for income taxes We account 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 our 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. As required by “Accounting for Uncertainty in Income Taxes” guidance, which clarifies ASC Topic 740, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the Consolidated Financial Statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. We apply “Accounting for Uncertainty in Income Taxes” guidance to all tax positions for which the statute of limitations remains open. We had no liabilities for uncertain tax positions for either fiscal 2025 or fiscal 2024. We file tax returns in the U.S. federal jurisdiction and Florida, Arizona, California, Connecticut, Idaho, Maryland, Michigan, Oklahoma, South Carolina, Virginia, Wisconsin, New Jersey, Georgia, Indiana, New York and the District of Columbia. With few exceptions, we are no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years ending March 31, 2020, or earlier. Any interest and penalties related to income taxes will be recorded to other income (expenses). ### Macroeconomic Factors We monitor the effects of the macroeconomic environment and take appropriate steps to mitigate the impact on our business, employees and financial condition; however, the nature and extent of this impact in future periods remains difficult to predict due to numerous uncertainties outside our control. ### Results of Operations (As Restated) The following should be read in conjunction with our 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 our consolidated statements of income: | | Fiscal Year Ended March 31, 2025 | 2024 As Restated | 2023 As Restated | | --- | ---: | ---: | ---: | | Sales | 100.0% | 100.0% | 100.0% | | Cost of sales | 69.5 | 69.1 | 69.1 | | Gross profit | 30.5 | 30.9 | 30.9 | | Operating expenses: | | | | | General and administrative | 17.0 | 20.2 | 16.7 | | Advertising | 10.5 | 11.2 | 10.2 | | Depreciation | 3.1 | 2.6 | 1.4 | | Impairment loss | 0.5 | — | — | | Total operating expenses | 31.1 | 34.0 | 28.3 | | (Loss) income from operations | (0.6) | (3.1) | 2.6 | | Total other income | 0.4 | 0.7 | 0.6 | | (Loss) income before provision for income taxes | (0.2) | (2.4) | 3.2 | | Provision for income taxes | 2.5 | 0.4 | 0.9 | | Net (loss) income | (2.7)% | (2.8)% | 2.3% | ### Non-GAAP Financial Measures #### Adjusted EBITDA To provide investors and the market with additional information regarding our financial results, we have disclosed (see below) adjusted EBITDA, a non-GAAP financial measure that we calculate as net income excluding share-based compensation expense; depreciation; income tax provision; interest income (expense); and other non-operational expenses. We have provided reconciliations below of adjusted EBITDA to net (loss) income, the most directly comparable GAAP financial measures. We have included adjusted EBITDA, herein, because it is a key measure used by our management and Board of Directors to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating adjusted EBITDA facilitates operating performance comparability across reporting periods by removing the effect of non-cash expenses and other expenses. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors. We believe it is useful to exclude non-cash charges, such as share-based compensation expense and depreciation from our adjusted EBITDA because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. We believe it is useful to exclude income tax provision and interest income (expense), as neither are components of our core business operations. We also believe that it is useful to exclude other expenses, including the investment banking fee related to the Vetster partnership, acquisition costs related to PetCareRx, employee severance and interest expense relating to an estimated unremitted prior period state sales tax accrual as these items are not indicative of our ongoing operations. Adjusted EBITDA has limitations as a financial measure, and these non-GAAP measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: - Although depreciation is a non-cash charge, the assets being depreciated may have to be replaced in the future and adjusted EBITDA does not reflect capital expenditure requirements for such replacements or for new capital expenditures; - Adjusted EBITDA does not reflect share-based compensation. Share-based compensation has been, and will continue to be for the foreseeable future, a material recurring expense in our business and an important part of our compensation strategy; - Adjusted EBITDA does not reflect interest income (expense), net; or changes in, or cash requirements for, our working capital; - Adjusted EBITDA does not reflect transaction related costs and other items which are either not representative of our underlying operations or are incremental costs that result from an actual or planned transaction and include litigation matters, integration consulting fees, internal salaries and wages (to the extent the individuals are assigned full-time to integration and transformation activities) and certain costs related to integrating and converging IT systems; - Adjusted EBITDA does not reflect certain non-operating expenses including the employee severance which reduces cash available to us; - Adjusted EBITDA does not reflect non operating expenses (income) including sales tax expense (income) relating to recording a liability for sales tax we did not collect from our customers or recognizing a gain on settlement from settling a state liability for less than recorded. - Other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces the measures usefulness as comparative measures. Because of these and other limitations, Adjusted EBITDA should only be considered as supplemental to, and alongside with other GAAP based financial performance measures, including various cash flow metrics, net income, net margin, and our other GAAP results. The following table presents a reconciliation of net loss, the most directly comparable GAAP measure to Adjusted EBITDA for each of the periods indicated: *($ in thousands, except percentages)* *Consolidated Reconciliation of GAAP Net Loss to Adjusted EBITDA:* | | Reconciliation of Non-GAAP Measures PetMed Express, Inc. Three Months Ended March 31, 2025 | March 31, 2024 As Restated | $ Change | % Change | | --- | ---: | ---: | ---: | ---: | | **Net loss** | **$(11,644)** | **$(5,016)** | **$(6,628)** | **132%** | | **Add (subtract):** | | | | | | **Share-based compensation expense** | **593** | **1,674** | **(1,081)** | **(65)%** | | **Income taxes** | **5,662** | **1,536** | **4,126** | **269%** | | **Depreciation and amortization** | **2,074** | **1,895** | **179** | **9%** | | **Interest expense (income), net** | **123** | **(30)** | **153** | **(510)%** | | **Acquisition/Partnership transactions and other items** | **26** | **385** | **(359)** | **(93)%** | | **Employee severance** | **75** | **104** | **(29)** | **(28)%** | | **Impairment loss** | **$1,200** | **$—** | **$1,200** | **n/m** | | **Adjusted EBITDA** | **$(1,891)** | **$548** | **$(2,439)** | **(445)%** | *($ in thousands, except percentages)* *Consolidated Reconciliation of GAAP Net Loss to Adjusted EBITDA:* | | Year Ended March 31, 2025 | March 31, 2024 As Restated | $ Change | % Change | | --- | ---: | ---: | ---: | ---: | | **Net loss** | **$(6,271)** | **$(7,464)** | **$1,193** | **(16)%** | | **Add (subtract):** | | | | | | **Share-based compensation expense (reversal)** | **(6,586)** | **6,870** | **(13,456)** | **(196)%** | | **Income taxes** | **5,684** | **1,191** | **4,493** | **377%** | | **Depreciation and amortization** | **7,039** | **7,056** | **(17)** | **—%** | | **Interest (income), net** | **(185)** | **(511)** | **326** | **(64)%** | | **Acquisition/Partnership transactions and other items** | **231** | **1,679** | **(1,448)** | **(86)%** | | **Employee severance** | **738** | **512** | **226** | **44%** | | **Sales tax expense (reversal)** | **(1,178)** | **(1,088)** | **(90)** | **8%** | | **Impairment loss** | **1,200** | **$—** | **1,200** | **n/m** | | **Adjusted EBITDA** | **$672** | **$8,245** | **$(7,573)** | **(92)%** | 35 ### Fiscal 2025 Compared to Fiscal 2024 (refer to our 10-K for the fiscal year ended March 31, 2024 for Fiscal 2024 Compared to Fiscal 2023) ### Sales (As Restated) Sales decreased by approximately $47.1 million or 17.2%, to approximately $227.0 million for the fiscal year ended March 31, 2025, compared to approximately $274.1 million for the fiscal year ended March 31, 2024. The decrease in sales for the fiscal year ended March 31, 2025 reflects a strategic reduction in advertising, broader macroeconomic factors, and higher consumer promotional usage. Reorder sales decreased by approximately $34.6 million, or 15.5%, to approximately $188.0 million for the fiscal year ended March 31, 2025, compared to approximately $222.6 million for the fiscal year ended March 31, 2024. The decrease in reorder sales for the fiscal year ended March 31, 2025 is primarily due to a decline in prescription medication sales. New order sales decreased by approximately $10.6 million or 25.5%, to approximately $31.1 million for the fiscal year ended March 31, 2025, compared to $41.7 million for the fiscal year ended March 31, 2024. The decrease for the fiscal year ended March 31, 2025 in new order sales is primarily due to a strategic reduction in advertising. We acquired approximately 351,000 new customers for the fiscal year ended March 31, 2025, compared to approximately 457,000 new customers for the same period in the prior year. The following chart illustrates sales by various sales classifications: | | Year Ended March 31, | | Increase (Decrease) | | --- | ---: | ---: | ---: | | **Net Sales (In thousands)** | **2025%** | **2024 As Restated%** | **$%** | | Reorder sales | $188,017 82.8% | $222,578 81.2% | $(34,561) -15.5% | | New order sales | 31,097 13.7% | 41,734 15.2% | (10,637) -25.5% | | Membership fees | 7,858 3.5% | 9,783 3.6% | (1,925) -19.7% | | Total net sales | $226,972 100.0% | $274,095 100.0% | $(47,123) -17.2% | The Company changed the definition of a new order sale on July 1, 2024, to include sales from customers who have not previously ordered from the Company over the past twelve months compared to the prior definition which was thirty-six months. The reorder and new order sales amounts for the years ended March 31, 2025 reflect this new customer definition change. Under the previous definition of a new customer, reorder and new order sales were $241 million and $23.7 million, respectively, for the year ended March 31, 2024. The Company offers an AutoShip & Save subscription program (“AutoShip”) on our website. AutoShip is a convenient way for our loyal customer base to have future pet medication orders delivered directly to them without the need to place an order each time. We are encouraged by the adoption of our AutoShip program and have seen an increasingly positive trend since we launched this program. Recurring sales, which includes AutoShip and membership revenue, as a percentage of total gross sales was 56.1% for the most recent quarter ended March 31, 2025, up from 53.5% for the same period last year and up from 56.2% sequentially in the prior quarter. Going forward sales may be adversely affected due to increased competition and consumers giving more consideration to price. The changes in consumer behavior post pandemic makes future sales somewhat challenging to predict. No guarantees can be made that sales will continue to grow in the future. ### Cost of sales (As Restated) Cost of sales decreased by approximately $31.5 million, or 16.6% to $157.8 million for the fiscal year ended March 31, 2025, from $189.3 million for the fiscal year ended March 31, 2024. The cost of sales decrease can be directly related to the decrease in sales during fiscal year 2025. As a percentage of sales, cost of sales was 69.5% in fiscal year 2025, as compared to 69.1% in fiscal 2024. The increase in cost of sales, as a percentage of sales, for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024 was primarily due to an increase in discount activity. ### Gross profit (As Restated) Gross profit decreased by approximately $15.6 million, or 18.4%, to $69.1 million for the fiscal year ended March 31, 2025, from $84.8 million for the fiscal year ended March 31, 2024. The decrease in gross profit can be directly related to the decrease in sales and lower profit margins during fiscal 2025. Gross profit as a percentage of sales for fiscal 2025 was 30.5% compared to 30.9% for fiscal 2024. The gross profit and gross profit percentage decreased for the fiscal year ended March 31, 2025 compared to the previous fiscal year. ### General and administrative expenses (As Restated) General and administrative expenses decreased by approximately $16.6 million, or 30.0%, to $38.6 million for the fiscal year ended March 31, 2025, from $55.2 million for the fiscal year ended March 31, 2024. The decrease in general and administrative expenses for the fiscal year ended March 31, 2025 was primarily due to a $16.2 million decrease in payroll and payroll related expenses. The decrease in payroll and payroll related expenses primarily consisted of a $13.5 million decrease in stock compensation expense, of which $8.7 million was from the one-time non-cash stock compensation reversal associated with an executive departure. General and administrative expenses as a percentage of sales was 17.0% for the fiscal year ended March 31, 2025, compared to 20.2% for the fiscal year ended March 31, 2024. ### Advertising expenses (As Restated) Advertising expenses, which is net of manufacturer funded advertising, decreased by approximately $6.8 million to $23.8 million for the fiscal year ended March 31, 2025, from $30.6 million for the fiscal year ended March 31, 2024. This decrease for the fiscal year ended March 31, 2025, can be mainly attributed to lower gross media spend and a higher proportion of spending funded by third party partners. As a percentage of sales, advertising expense was 10.5% and 11.2% for the fiscal years ended March 31, 2025, and 2024, respectively. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, were $68 for the fiscal year ended March 31, 2025, compared to $67 for the fiscal year ended March 31, 2024, per the new definition of new customers. The advertising cost of acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising creative, spending, and price competition. Historically, the advertising environment fluctuates due to supply and demand. A more favorable advertising environment may positively impact future sales, whereas a less favorable advertising environment may negatively impact future sales. ### Depreciation and amortization Depreciation and amortization expense was approximately $7.0 million and $7.1 million for the fiscal years ended March 31, 2025 and March 31, 2024, respectively. ### Other income Other income decreased by approximately $0.9 million, to $0.9 million for the fiscal year ended March 31, 2025, from $1.9 million for the fiscal year ended March 31, 2024. The decrease was primarily due to lower invested balances. Interest income, net may decrease in the future as we utilize our cash balances on future investments or partnerships, on our operating activities, enter a credit facility or if the current interest rate environment changes. ### Provision for income taxes For the fiscal years ended March 31, 2025 and 2024, we recorded an income tax provision of approximately $5.7 million and $1.2 million, respectively. The increase to the income tax provision for fiscal 2025 is primarily due to the Company establishing a full valuation allowance against its net deferred tax assets. Our effective tax rate for the fiscal year ended March 31, 2025 was approximately (968.3)%, compared to approximately (19.0)% for the fiscal year ended March 31, 2024. The pre-tax loss in fiscal 2024 caused unfavorable items to decrease the rate instead of increasing it. The primary drivers of the rate are related to the increase in valuation allowance against the Company's net deferred tax assets, partially offset with the non-deductible executive compensation under Sec. 162(m) of the Internal Revenue Code. This limits deductions for compensation of covered executives to $1.0 million per individual. ### Net loss Net loss decreased by approximately $1.2 million, to a loss of approximately $6.3 million for the fiscal year ended March 31, 2025, from a loss of approximately $7.5 million for the fiscal year ended March 31, 2024. The decrease to net loss was primarily related to a decrease in general and administrative expenses, including the above-mentioned $8.7 million non-cash stock compensation reversal and advertising expenses, partially offset by a decrease in sales and gross profit, and an increase in the provision for income taxes during the fiscal year. ### Liquidity and Capital Resources At March 31, 2025, we had $54.7 million in cash and cash equivalents and no debt obligations. Our working capital at March 31, 2025 and 2024 was approximately $16.1 million and approximately $21.5 million, respectively. The $5.4 million decrease in working capital was attributable to $14.8 million decrease in current assets, out of which $12.4 million from inventory and $9.4 million decrease in current liabilities, out of which $9.5 million from accounts payable and accrued expenses. Net cash provided by operating activities remained essentially unchanged at $4.7 million and $4.3 million for the fiscal years ended March 31, 2025 and 2024, respectively. The $0.4 million increase in cash provided by operating activities is due to the $1.2 million decrease in net loss reduced by $7.3 million of non-cash operating adjustments and partially offset by the $6.5 million increase in current liabilities net of current assets excluding cash. Net cash used in investing activities was $5.1 million and $40.7 million for the fiscal years ended March 31, 2025 and 2024, respectively. This change in investing activities reflects the PetCareRx acquisition in the prior year. Net cash used in financing activities was $0.2 million and $12.4 million for the fiscal years ended March 31, 2025 and 2024, respectively, due to the payment of an aggregate $0.60 per share dividend in fiscal year 2024. We paid cash dividends quarterly from August 2009 to August 2023. On February 1, 2024, our Board of Directors elected to suspend the quarterly dividend indefinitely. This move is intended to focus use of the Company’s cash flow on growth initiatives and other higher return initiatives. The Board of Directors reviews and discusses the capital allocation needs of the Company, at a minimum, on a quarterly basis. The declaration and payment of future dividends is discretionary and will be subject to a determination by the Board of Directors. When considering whether to declare a dividend, our Board of Directors will take into account: - General economic and business conditions; - Our financial condition and operating results; - Our available cash and current and anticipated cash needs; - Our capital requirements; - Strategic uses of cash for growth initiatives; - Contractual, legal, tax and regulatory restrictions on the payment of dividends by us; and - Such other factors as our Board of Directors may deem relevant. On April 3, 2023, we closed on our acquisition of PetCareRx for aggregate cash consideration of approximately $36.0 million. At March 31, 2025 we had no material outstanding purchase or lease commitments. Other than the lease commitments assumed as part of the PetCareRx acquisition for the leases on two buildings, we are not currently bound by any long- or short-term agreements for the purchase or lease of property and equipment. Any material amounts expended for property and equipment would be the result of an increase in the capacity needed to adequately provide for any future 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. Our primary source of working capital is cash from operations. We presently have no need for alternative sources of working capital and have no commitments. ### Recent Accounting Pronouncements Other than disclosures included in Note 1 of the Consolidated Financial Statements, which are incorporated by reference as if fully set forth herein, we do not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, will have a material effect on our consolidated financial position, results of operations, or cash flows. ## Market risk As filed, 1,620 characters. 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 cash equivalents. At March 31, 2025, we had $54.7 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 maintaining cash in federally-insured bank deposit accounts and restricting cash equivalents to highly-liquid investments with a maturities of three months or less. We do not hold any derivative financial instruments that could expose us to significant market risk. At March 31, 2025, we had no debt obligations. ## Controls and procedures As filed, 18,800 characters. #### Evaluation of Disclosure Controls and Procedures Management maintains a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow for timely decisions regarding required disclosure. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2025, the end of the period covered by this report (the “Evaluation Date”) was performed under the supervision and with participation of management, including our Interim Chief Executive Officer and Interim Principal Financial Officer. Based upon that evaluation, our Interim Chief Executive Officer and Interim Principal Financial Officer concluded as of the Evaluation Date, that our disclosure controls and procedures were not effective as of March 31, 2025, due to the material weaknesses in internal control over financial reporting described below. *Management’s Report on Internal Control over Financial Reporting* Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Interim Chief Executive Officer and Interim Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2025 based on the framework in *Internal Control — Integrated Framework* issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in *Internal Control — Integrated Framework,* management concluded that our internal control over financial reporting was not effective, as of March 31, 2025, as a result of the material weaknesses described below. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As previously reported in our Form 10-K filed on June 14, 2024 the following material weaknesses continued to exist as of March 31, 2025: - **Information Technology General Controls (“ITGCs”) –** A material weakness in internal controls relating to our ITGCs in the areas of user access, change management and service organizations over information technology (“IT”) systems that support the Company’s financial reporting processes. We concluded this ITGC material weakness may impact revenue and other business process controls and automated controls reliant upon these ITGCs. We believe that this material weakness was partially the result of lack of documentation created and retained to evidence management's procedures in addition to new in-scope systems related to the PCRX acquisition. While our ITGCs have substantially improved since fiscal year 2024, these control deficiencies continued to exist and result in an overall material weakness as of March 31, 2025. - **Income and Sales Taxes –** During fiscal 2024, errors were identified in (1) the appropriate application of US GAAP relating to our sales tax liability and (2) the misapplication of Internal Revenue Code 162(m) which limits the deductibility of executive compensation in our consolidated financial statements. Additionally, in fiscal 2025 errors were identified in the calculation of our income tax provision, specifically related to our management review control over the income tax provision. While Management has made significant progress in remediating the sales tax deficiency, by hiring a third-party tax specialist with the requisite knowledge and resources and implementing a new control over the calculation of sales taxes, the material weakness will not be considered remediated until the implemented controls operate for a sufficient period of time and Management has concluded, through testing, that the related controls are effective. Consequently, Management has determined that this material weakness continues to exist as of March 31, 2025. We will continue to monitor the effectiveness of our remediation plan and refine the remediation plan as appropriate. - **Complex Accounting Matters –** During fiscal 2024, Management identified a material error in the PetCareRx purchase accounting related to the valuation of deferred tax assets and goodwill, which resulted in the restatement of our unaudited condensed consolidated financial statements included in our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2023 and September 30, 2023. Additionally, during fiscal 2025, a deficiency was identified in the operating effectiveness of controls over management’s identification of triggering events and evaluation of impairment related to long-lived assets. Management has determined that this material weakness continues to exist as of March 31, 2025. As described elsewhere in this Form 10-K, the Audit Committee engaged external legal counsel with other external advisors to investigate reports filed through the Company’s third-party-administered whistleblower hotline regarding: the timing of revenue recognition with respect to certain AutoShip orders in the fiscal fourth quarter of 2025, some of which resulted in customer complaints; a fiscal fourth quarter 2025 $50 coupon promotion to customers and its potential impact on Company key-performance indicators (“KPIs”) regarding new customers; and the Company’s culture and control environment (the “Investigation”). In connection with the preparation of our Annual Report on Form 10-K for the year ended March 31, 2025 and the completed Investigation, we identified additional material weaknesses in our internal control over financial reporting. Specifically, the Company did not have an effective control environment, risk assessment process, information and communication process and monitoring activities. The aggregation of issues identified within each of these areas resulted in the conclusion that a material weakness existed with respect to the “tone at the top” and effectiveness of governance within the Company: - The Company failed to establish a tone at the top that fostered a culture of commitment to the principles set forth in the Company’s Code of Business Conduct and Ethics. - The Company did not have effective information communication and monitoring controls, including a robust whistleblower process, relating to the timely identification and communication of issues among financial reporting personnel, management, the Board, and the independent registered public accounting firm to enable appropriate analysis, financial reporting, and disclosure of such transactions. - The Company lacked effective controls and procedures that facilitated effective internal communication of alleged violations of the Code of Conduct. - The Company lacked an effective and continuous risk assessment process and related controls to properly monitor, identify and analyze risks, including related risks of financial misstatement due to error and / or fraud, including management override of controls. - The Company lacked effective controls and procedures regarding the update of key accounting policies. - The former Audit Committee chair did not promptly report whistleblower complaints to the Company’s external auditors, RSM US LLP. This tone at the top material weakness contributed to an additional material weakness related to the following: - Management determined that certain the control activities within the revenue recognition business process, resulting in certain AutoShip revenue being recorded prior to the time at which all of the revenue recognition criteria were met. As a result of the material weakness, material errors were identified and corrected in the Company’s financial statements that had initially been provided to the Company’s independent auditors, RSM US LLP. These corrections were made prior to the issuance of the audited financials for the year ended March 31, 2025. - Management determined that it did not design and maintain effective controls over the complete, accurate and timely recording of cooperative advertising and vendor reimbursements due to: (1) the misapplication of the accounting guidance in ASC 705, Accounting for Consideration Received from Vendors; (2) a lack of review of certain provisions in vendor contracts and (3) lack of communicating and sharing information between the sales, accounting and finance departments. As a result of the material weakness, the material errors were identified and corrected in the Company’s financial statements that had initially been provided to the Company’s independent auditors, RSM. These corrections were made prior to the issuance of the audited financials for the year ending March 31, 2025. Additionally, the Company determined that the consolidated financial statements for the years ended March 31, 2024, and 2023; as well as, the interim periods within fiscal years ended March 31, 2025, 2024, and 2023, should be restated. #### Remediation Plan – ITGC Material Weakness The Company is committed to remediating the ITGC material weakness identified above, fostering continuous improvement in internal controls and enhancing its overall internal control environment. Since identifying the above material weakness, the Company has begun the process of implementing the remediation activities described below. We have put forth significant resources and effort to remediate our material weakness relating to ITGCs and our ITGCs have substantially improved since 2024. Our efforts to remediate our ITGC material weakness include: - Continuing to utilize third-party consultants specialized in ITGCs, internal audit, risk management and compliance functions. Their expertise will help us to continually assess risk and design and implement appropriate controls to address said risks. - Continuing to implement ITGCs to address new risks and enhance the design of ITGCs to address changing risks. - Providing additional training for control owners and reviewers with specific focus on understanding the risks being addressed by the controls they are performing, as well as requirements for sufficient documentation and evidence in the execution of the controls. - Continuing to analyze controls and policies as we upgrade our environment and systems in the upcoming year. - Continuing to enhance our reporting process related to the remediation measures to the Audit Committee. The material weakness around ITGCs described herein will not be remediated until our remediation plan has been fully developed and implemented, the applicable controls operate for a sufficient period of time, and we have concluded, through testing, that the newly implemented and enhanced controls are designed and operating effectively. We may conclude that additional measures, including resources, are necessary to remediate the material weakness in our internal control over financial reporting, which may necessitate additional evaluation and implementation time. We may also modify certain of the remediation efforts described above. #### Remediation Plan – Income and Sales Taxes The following actions and plans will be or have been implemented during fiscal 2025 and fiscal 2026: - In fiscal 2025, Management hired a third-party tax specialist to assist in income and sales tax related matters. - Management will enhance the oversight and review of tax-related accounting estimates and calculations to ensure they are complete and accurate. - The Company will provide additional training to personnel involved in tax accounting and financial reporting to enhance their understanding of the relevant accounting standards and requirements. - The Company will enhance and retain the documentation of tax positions and related accounting judgments to ensure they are adequately supported and can withstand external scrutiny. #### Remediation Plan – Complex Accounting Matters The following actions and plans will be or have been implemented during fiscal 2025 and fiscal 2026: - Management will enhance its policy, procedures and process level controls on how it gathers and analyzes relevant facts and circumstances in connection with all complex business transactions. - The Company will engage a third-party specialist to assist with accounting for complex accounting matters. - The Company will provide additional training to personnel involved in accounting for complex accounting matters and financial reporting to enhance their understanding of the relevant accounting standards and requirements. #### Remediation Plan – Tone at the Top The following actions and plans will be or have been implemented during the fiscal 2026 year: On July 24, 2025, the Chair of our Audit Committee, Diana Purcel resigned from the Board. - On August 11, 2025, The Board appointed Leslie C.G. Campbell to serve as our interim Chief Executive Officer following the resignation of the Company’s CEO, Sandra Campos. - On August 11, 2025, The Board appointed Douglas Krulik as the Company’s interim Principal Financial Officer, reporting to the Company’s interim Chief Executive Officer and the Audit Committee of the Board following the resignation of the Company’s CFO, Robyn D’Elia. - On August 11, 2025, Peter Batushansky was appointed Chair of the Board’s Audit Committee, succeeding Ms. Campbell who served as Chair of the Audit Committee from July 24 until August 11, 2025. Leah Solivan was appointed to Chair of the Board’s Compensation and Human Capital Committee. The Company reconstituted the membership of its Board committees and the Board reduced the number of directors on the Board to five members until such time as the Board determines to appoint or nominate additional directors. - The Company will update its Code of Conduct to establish formalized protocols for situations where one senior executive makes allegations against another. Additionally, the Company will implement a quarterly recertification process and enhance employee training focused on ethical values, compliance with applicable laws, regulations, and Company policies—including the Code of Conduct—and will emphasize the importance of accurate and transparent financial reporting. - Under the supervision of the Board, the Company will emphasize to key leadership the importance of setting appropriate tone at the top and of appropriate behavior with respect to accurate financial reporting, compliance with laws, and adherence to the Company’s internal control over financial reporting framework and accounting policies. #### Remediation Plan – Revenue Recognition The following actions and plans will be or have been implemented during the fiscal 2026 year: - The Company will implement a more robust risk assessment process focused on identifying and analyzing risks of financial misstatement due to error and/or fraud, including management override of controls. On an annual basis (or more frequently, should a significant triggering event occur), the Company will update its risk assessment to ensure that the scope of its Sarbanes-Oxley compliance program adequately reflects changes to the business and its operations. - The Company will update its key policies and procedures to ensure the proper processing of transactions with senior executives, and to enhance the review and approval for these types of transactions and ensure their proper disclosure and will train relevant employees on such updated policies. - The Company will conduct internal training courses over Sarbanes-Oxley regulations and the Company’s internal control over financial reporting program for Company personnel involved in the execution of the program. - We will engage third-party experts, as necessary, to assist our management with the review of the accounting treatment and the financial reporting and disclosure of significant, complex or non-recurring transactions. - Prior to the filing of this Form 10-K, the Company established a Disclosure Committee comprised of senior management representatives from all relevant departments within the organization. Members of this committee are responsible for reviewing all quarterly and annual SEC filings, and meet prior to each filing to discuss the completeness and accuracy of the document being filed. - The Company is designing and implementing a variety of new procedures, such as enhancing its weekly business review meetings amongst senior management that are attended by members of the accounting department and Board, to ensure that cross-functional senior management is aware of operational changes that may affect the Company. - The Company will design and implement additional controls over revenue recognition, specifically relating to its AutoShip program. #### Remediation Plan – Cooperative Advertising and Vendor Reimbursements The following actions and plans will be or have been implemented during the fiscal 2026 year: - Management will enhance its policy, procedures and process level controls on how it gathers and analyzes relevant facts and circumstances in connection with cooperative advertising and vendor contracts. - The Company will provide additional training to personnel involved in accounting for cooperative advertising and vendor reimbursements and financial reporting to enhance their understanding of the relevant accounting standards and requirements. #### Changes in Internal Control over Financial Reporting Other than as described above, there were no changes in our internal control over financial reporting during the fourth quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. #### Inherent Limitations on Effectiveness of Controls In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design and disclosure controls and procedures must reflect the fact that there are resource constraints, and that Management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their cost. Filed Oct 14, 2025. Source: SEC EDGAR, the filing index for accession 0001040130-25-000072. Last ingested by Listed: Nov 6, 2026, 18:20 ET. No prices; not investment advice.