PetMed Express, Inc. and subsidiaries, d/b/a 1-800-PetMeds, is a leading nationwide pet pharmacy.  The Company markets prescription and non-prescription pet medications, and other health products for dogs cats, and horsescats, direct to the consumer.  The Company offers consumers an attractive alternative for obtaining pet medications in terms of convenience, price, and speed of delivery.

We offer a broad selection of products for dogs cats, and horses.cats.  Our current product line contains approximately 750 skus.1200 SKUS.  These products include a majority of the well-known brands of medication, such as Frontline Plus®, K9 Advantix®, II, Advantage®, II, Heartgard Plus®, Sentinel®, Interceptor®, Program®, Revolution®, Deramaxx®, and Rimadyl®.  Generally, our prices are competitive with the prices for medications charged by veterinarians and retailers.

  In March 2010, the Company started offering for sale additional pet supplies on our website, which are drop shipped to our customers by third parties.  These pet supplies include: food, beds, crates, stairs, strollers, and other popular pet supplies.

We research new products, and regularly select new products or the latest generation of existing products to become part of our product selection.  In addition, we also refine our current products to respond to changing consumer-purchasing habits.  Our website is designed to give us the flexibility to change featured products or promotions.  Our product line provides customers with a wide variety of selections across the most popular health categories for dogs cats, and horses.cats.  Our current products include:

The following table provides a breakdown of the percentage of our total sales by each category during the indicated periods:

	Year Ended March 31,
	2009		2008		2007
Non-prescription medications	68%		69%		70%
Prescription medications	31%		30%		29%
Shipping and handling charges and other	1%		1%		1%
Total	100%		100%		100%

We seek to combine our product selection and pet health information with the shopping ease of the Internet to deliver a convenient and personalized shopping experience.  Our website offers health and nutritional product selections for dogs cats, and horses,cats, and relevant editorial and easily obtainable or retrievable resource information.  From our home page, customers can search our website for products and access resources on a variety of information on dogs cats, and horses.cats.  Customers can shop at our website by category, product line, individual product, or individual product.symptom.  We attracted approximately 1619.1 million visitors to our website during fiscal 2009,2012, approximately 12%13% of those visitors placed an order, and our website generated approximately 65%75% of our total sales for the same time period.

Our customer care representatives receive and process inbound and outbound customer calls, facilitate our outbound campaigns around maximizing customers’ reorders, facilitate our live web chat, and process customer e-mails.  Our telephone system is equipped with certain features including pop-up screens and call blending capabilities that give us the ability to efficiently utilize our customer care representatives’ time, providing excellent customer care, service, and support.  Our customer care representatives receive a base salary and are rewarded with commissions for sales, and bonuses and other awards for achieving certain quality goals.

The 1-800-PetMeds catalog is a full-color catalog that features our most popular products.  The catalog is produced by a combination of in-house writers, production artists, and independent contractors.  We mail catalogs, brochures, and postcards in response to requests generated from our advertising and as part of direct mail campaigns to our customers.

Approximately 2,500,0002.7 million customers have purchased from us within the last two years.  We attracted approximately 802,000722,000 and 710,000645,000 new customers in fiscal 20092012 and 2008,2011, respectively.  Our customers are located throughout the United States, with approximately 50% of customers residing in California, Florida, Texas, New York, Texas, Pennsylvania, Virginia, Georgia, North Carolina, and New Jersey.  While ourOur primary focus has been on retail customers we have also sold various non-prescription medications wholesale to a variety of businesses, including pet stores, groomers, and traditional retailers in the United States.  For the fiscal year ended March 31, 2009, the majority of our sales were made to retail customers with less than 1% of our sales made to wholesale customers.  The average retail purchase was approximately $82$76 for fiscal 20092012 compared to $80$79 for fiscal 2008.

2011.

The goal of our marketing strategy is to build brand recognition, increase customer traffic, add new customers, build strong customer loyalty, maximize reorders, and develop incremental revenue opportunities.  We have an integrated marketing campaign that includes television advertising, online marketing, direct mail/print and e-mail, and online marketing.

e-mail.

Our television advertising is designed to build brand equity, create brand awareness, and generate initial purchases of products via the telephone and the Internet.  We have used :30 and :15 second television commercials to attract new customer orders.  Our television commercials typically focus on our ability to rapidly deliver to customers the same medications offered by veterinarians, but at reduced prices.  We generally purchase advertising on national cable channels to target our key demographic group – women, ages 30 to 65.  We believe that television advertising is particularly effective and instrumental in building brand awareness.  Our most current television commercial, airing nationally, speaks to pet owners about the savings and convenience of purchasing the same exact pet medications from 1-800-PetMeds, compared to purchasing the medications from a veterinarian.   

Direct Mail/Print and E-mail

We use direct mail/print and e-mail to acquire new customers and to remind our existing customers to reorder.   

We supplement our traditional advertising with online advertising and marketing efforts.  We make our brand available to Internet consumers by purchasing targeted keywords and achieving prominent placement on the top search engines and search engine networks, including Google, Microsoft Network,Bing™, and Yahoo.Yahoo®.  We utilize Internet bannerdisplay and video advertisements, social media, and comparison shopping, and we are also members of the LinkShare Network, which is an affiliate program with merchant clients and affiliate websites.  This network

Our website allows customers to easily browse and purchase all of our products online.  Our website is designed to developbe fast, secure, and build a long-term, branded affiliate program ineasy to use with order to increaseand shipping confirmations, and with online sales and establish an Internet presence.  The LinkShare Network enables us to establish link arrangements with other websites, as well as with portals and search engines.

Operations

Purchasing

We purchase our products from a variety of sources, including certain manufacturers, domestic distributors, and wholesalers.  We have multiple suppliers for each of our products to obtain the lowest cost.  There are currently three suppliers from whom we purchased approximately 50% of all products in fiscal 2009.  We purchase the majority of our health and nutritional supplements directly from manufacturers.  We believe having strong relationships with product manufacturers will ensure the availability of an adequate volume of products ordered by our customers, and will enable us to provide more and better product information.  Historically, substantially all the major manufacturers of prescription and non-prescription medications have declined to sell these products to direct marketing companies, such as our Company.  (See Risk Factors.)  Part of our growth strategy includes develo ping direct relationships with the leading pharmaceutical manufacturers of the more popular prescription and non-prescription medications.

Order Processing

order tracking capabilities.  We provide our customers with toll-free telephone access to our customer care representatives.  Our call center generally operates from 8:00 AM to 11:00 PM, Monday through Thursday, 8:00 AM to 9:00 PM on Friday, 9:00 AM to 6:00 PM on Saturday, and 10:00 AM to 5:00 PM on Sunday, Eastern Time.  The process of customers purchasing products from 1-800-PetMeds consists of a few simple steps.  A customer first places a call to our toll-free telephone number or visits our website.  The following information is needed to process prescription orders: general pet information, prescription information, and the veterinarian’s name and phone number.  This information is entered into our computer system.  Then our pharmacists and pharmacy technicians verify all prescriptions.  The order process system checks for the verification for prescription medication orders and a valid payment method fo rfor all orders.  An invoice is generated and printed in our fulfillment center, where items are picked, for shipping.  The product(s) in the customer’s order areand then selected from the Company's inventory and

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shipped via United States Postal Service, United Parcel Service,Federal Express, or Federal Express.UPS.  Our customers enjoy the convenience of rapid home delivery, with approximately 75%80% of all orders being shipped within 24 hours of ordering.  Our website allows customers to easily browse and purchase substantially all of our products online.  Our website is designed to be fast, secure, and easy to use with order and shipping confirmations, and with online order tracking capabilities.

Warehousing and Shipping

We inventory our products and fill all customer orders from our corporate headquarters in Pompano Beach, Florida.  We have an in-house fulfillment and distribution operation, which is used to manage the entire supply chain, beginning with the placement of the order, continuing through order processing, and then fulfilling and shipping of the product to the customer.  We offer a variety of shipping options, including next day delivery.  We ship to anywhere in the United States served by the United States Postal Service, United Parcel Service, or Federal Express.  Priority orders are expedited in our fulfillment process.  Our goal is to ship the products the same day that the order is received.  For prescription medications, our goal is to ship the product immediately after the prescription has been authorized by the customer’s veterinarian.

We believe that a high level of customer care and support is critical in retaining and expanding our customer base.  Customer care representatives participate in ongoing training programs under the supervision of our training managers.  These training sessions include a variety of topics such as product knowledge, computer usage, customer service tips, and the relationship between our Company and veterinarians.  Our customer care representatives respond to customers’ e-mails and calls that are related to products, order status, prices, and shipping.  Our customer care representatives also respond to customers through our live web chat.  We believe our customer care representatives are a valuable source of feedback regarding customer satisfaction.  Our customer returns and credits averageaveraged approximately 1.5 %1.5% of total sales.

sales for fiscal 2012.

We utilize integrated technologies in our call centers, e-commerce, order entry, and inventory control/fulfillment operations.  Our systems are custom configured by the Company to optimize our computer telephone integration and mail-order processing.  The systems are designed to maintain a large database of specialized information and process a large volume of orders efficiently and effectively.  Our systems provide our customer care representatives, and our customers on our website, with real time product availability information and updated customer information to enhance our customer care.  We also have an integrated direct connection for processing credit cards to ensure that a valid credit card number and authorization have been received at the same time our customer care representatives are on the phone with the customer or when a customer submits an order on our website.  Our informati oninformation systems provide our customer care representatives with records of all prior contact with a customer, including the customer’s address, phone number, e-mail address, fax number, prescription information, order history, payment history, and notes.

The pet medications market is competitive and highly fragmented.  Our competitors consist of veterinarians, online and traditional retailers, and other mail-order and online retailers of pet medications and other health products.retailers.  We believe that the following are the principal competitive factors in our market:

·

Product selection and availability, including the availability of prescription and non-prescription medications;

·

Brand recognition;

·

Reliability and speed of delivery;

·

Personalized service and convenience;

·

Price; and

·

Quality of website content.

We compete with veterinarians for the sale of prescription and non-prescription pet medications and other health products.  Many pet owners may prefer the convenience of purchasing their pet medications or other health products at the time of a veterinarian visit, or may be hesitant to offend their veterinarian by not purchasing these products from the veterinarian.  In order to effectively compete with veterinarians, we must continue to educate pet owners about the service, convenience, and savings offered by our Company.

According to the American Pet Products Manufacturers Association, pet spending in the United States increased 5.3% to $43.4$51.0 billion in 2008.2011.  Pet supplies and medications represented $10.3$11.8 billion, or 24%23% of the total spending on pets in the United States.  The pet medication market that we participate in is estimated to be approximately $3.6$4.0 billion, with veterinarians having the majority of the market share.  The dog and cat population is approximately 163165 million, with approximately 63%62% of all households owning a pet.

Dispensing prescription medications is governed at the state level by the BoardBoards of Pharmacy, or similar regulatory agencies, of each state where prescription medications are dispensed.  We are subject to regulation by the State of Florida and are licensed as a community pharmacy by the Florida Board of Pharmacy.  Our current license is valid until February 28, 20112013, and prior to that date a renewal application will be submitted to the Board of Pharmacy.  Our pharmacy practice is also licensed and/or regulated by 49 other state pharmacy boards 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.  As a licensed pharmacy in the State of Florida, we are subject to the Florida Pharmacy Act and regulations promulgated thereunder.  To the extent that we are unable to maintain our license as a community pharmacy with the Florida Board of Pharmacy, or if we do not maintain the licenses granted by other state pharmacy boards, or if we become subject to actions by the FDA, or other enforcement regulators, our distribution of prescription medications to pet owners could cease, which could have a material adverse effect on our financial condition and results of operations.

We currently have 248207 full time employees, including: 143125 in customer care and marketing; 3433 in fulfillment and purchasing; 5835 in our pharmacy; 4 in information technology; 43 in administrative positions; and 57 in management.  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 satisfactory.

The sale and delivery of prescription pet medications is generally governed by state laws and state regulations.  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.  To the extent that we are unable to maintain our license as a community pharmacy with the Florida Board of Pharmacy, 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 distribution of pr escriptionprescription medications to pet owners could cease, which could have a material adverse effect on our operations.

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 continue to 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 a sas a community pharmacy in the State of Florida, 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.

The majority of our sales were attributable to sales of prescription and non-prescription medications.  Historically, substantially all the major pharmaceutical manufacturers have declined to sell prescription and non-prescription pet medications directly to us.  In order to assure a supply of these products, we purchase medications from various secondary sources, including a variety of domestic distributors.  Our business strategy includes seeking to establish direct purchasing arrangements with major pet pharmaceutical manufacturing companies.  If we are not successful in achieving this goal, we will continue to rely upon secondary sources.

We cannot guarantee that if we continue to purchase prescription and non-prescription pet medications from secondary sources that we will be able to purchase an adequate supply to meet our customers’ demands, or that we will be able to purchase these products at competitive prices.  As these products represent a significant portion of our sales, our failure to fill customer orders for these products could adversely impact our sales.  If we are forced to pay higher prices for these products to ensure an adequate supply, we cannot guarantee that we will be able to pass along to our customers any increases in the prices we pay for these medications.  This inability to pass along increased prices could materially adversely affect our financial condition and results of operations.

Our current product line contains approximately 7501200 SKUs.  A significant portion of our sales is attributable to products representing approximately 90 SKUs.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 and increased inventory carrying costs.  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.

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.  Sales of prescription medications represented approximately 31%40% of our sales for the fiscal year.  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 a ndand results of operations may 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, 20092012 were made to customers located in the states of California, Florida, Texas, New York, Texas, Pennsylvania, Virginia, Georgia, North Carolina, and New Jersey.   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 granted or 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 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 of pet medications and health and nutritional supplements.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 or through catalog or telephone methods.  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 orand 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 retail and online 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.

Because we post product and pet health information and other content on our website, 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 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 non-prescription private label 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 website 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, andor 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.  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.

Our headquarters and distribution center are located in two buildings in one location in South Florida, and allmost of our shipments of products to our customers are made from this sole distribution center.  We have no present plans to establish any additional distribution centers or offices.  Because we consolidate our operations 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 we are located in South Florida, which is a hurricane-sensitive area, 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.  We cannot assure you that we are adequately insured to cover the amount of any losses relating to any of these pot entialpotential events, business interruptions resulting from damage to or destruction of our headquarters and distribution center, 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

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occurrence of one or more of these events could adversely impact our ability to generate revenues in future periods.

A portion of our sales are seasonal and our

Because our operating results are difficult to predict, we believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance.  The majority of our product sales are affected by the seasons, due to the seasonality of mainly heartworm, and flea and tick medications.  For the quarters ended June 30, 2008,2011, September 30, 2008,2011, December 31, 2008,2011, and March 31, 2009,2012, Company sales were 31%, 27%24%, 20%21%, and 22%24%, respectively.  In addition to the seasonality of our sales, our annual and quarterly operating results have fluctuated in the past and may fluctuate significantly in the future due to a variety of factors, many of which are out of our control.  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 website, or our ability to convert visitors to our website 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 website, the systems that we use to process customers’ orders and payments, or our computer network;

·

Increased competition within our market niche;

·

Price competition;

·

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; and

·

Disruption of our toll-free telephone service, technical difficulties, or systems and Internet outages or slowdowns.

Any change in one or more of these factors could materially adversely affect our financial condition and results of operations in future periods.

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: quarterly variations in operating results; changes in accounting treatments or principles; announcements by us or 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 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'smanagement’s attention and resources, which could seriously harm our business and operating results.

Our charter permits our Board of Directors to issue up to 5,000,0005.0 million shares of preferred stock without stockholder approval.  Currently there are 2,500 shares of our Convertible Preferred Stock issued and outstanding.  This leaves 4,997,500a little 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 stockholders 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 stockholders believe it is in their best interest.

The Company has settled complaints that had been filed with various states’ pharmacy boards in the past.  There can be no assurances made that other states will not attempt to take similar actions against the Company in the future.  The Company initiates litigation to protect its trade or service marks.  There can be no assurance that the Company will be successful in protecting its trade or service marks.  Legal costs related to the above matters are expensed as incurred.

On August 3, 2009, the Company’s Board of Directors declared its first quarterly dividend of $0.10 per share on its common stock.  We presently intendOn August 2, 2010, the Company’s Board of Directors increased the quarterly dividend to retain$0.125 per share, and then on January 27, 2012, the Company’s Board of Directors increased the quarterly dividend to $0.15 per share.  The Company intends to continue to pay regular quarterly dividends; however the declaration and payment of future earningsdividends is discretionary and will be subject to financea determination by the expansionBoard of Directors each quarter following its review of the Company’s financial performance.

On May 4, 2012, the Company’s Board of Directors declared a quarterly dividend policy will dependof $0.15 per share on our earnings, capital requirements, expansion plans, financial condition, and other relevant factors.

Securities Authorized for Issuance under Equity Compensation Plans

its common stock.  The following table sets forth securities authorized for issuance under equity compensation plans, including individual compensation arrangements, by us under our 1998 Stock Option Plan, 2006 Employee Equity Compensation Restricted Stock Plan, and 2006 Outside Director Equity Compensation Restricted Stock Plan as$3.1 million dividend was paid on May 25, 2012, to shareholders of March 31, 2009:

EQUITY COMPENSATION PLAN INFORMATION
		Number of securities
		to be issued upon		Weighted average
		exercise of outstanding		exercise price of		Number of securities
		options, warrants		outstanding options,		remaining available
Plan category		and rights		warrants and rights		for future issuance
1998 Stock Option Plan (1)		147,914		$7.27		-
2006 Employee Restricted Stock Plan		247,609		-		752,391
2006 Director Restricted Stock Plan		68,000		-		132,000
Total		463,523				884,391

(1) The 1998 Stock Option Plan expiredrecord at the close of business on July 31, 2008.

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May 14, 2012.

On November 8, 2006, the Company announced that theCompany’s Board of Directors authorized theapproved a share repurchase plan of up to $20,000,000 of the Company’s common stock.$20.0 million.  On October 31, 2008, November 1, 2010, and August 1, 2011, the Company’s Board of Directors approved a second, third, and fourth share repurchase program of up to $20,000,000.  Thisplan, respectively, each for an additional $20.0 million.  The repurchase plan is intended to be implemented through purchases made from time to time in either the open market or through private transactions at the Company'sCompany’s discretion, subject to market conditions and other factors, in accordance with Securities and Exchange Commission requirements.  

There can be no assurances as to the precise number of shares that will be repurchased under the share repurchase plan, and the Company may discontinue the share repurchase plan at any time subject to compliance with applicable regulatory requirements.  Shares purchased pursuant to the share repurchase plan will either be retiredcancelled or held in the Company'sCompany’s treasury.  Any share repurchase would reduce our available cash.  

During fiscal 2009 we2012 the Company repurchased approximately 1,347,0002.1 million shares of ourthe Company’s outstanding common stock for approximately $18,448,000,$23.7 million, averaging approximately $13.70$11.36 per share.  As of March 31, 2012, the Company had approximately $14.0 million remaining under the Company’s share repurchase plan.  During fiscal 2011 the Company repurchased approximately 791,000 shares of the Company’s outstanding common stock for approximately $12.2 million, averaging approximately $15.47 per share.  All shares repurchased in fiscal 20092012 and 2011 were subsequently retired.

The table below provides information with respect to purchases by the Company of shares of common stock during the three months ended March 31, 2009:

Month / Year		Total Number of Shares Purchased		Average Price Paid Per Share			Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program
January 2009 (January 1, 2009 to January 31, 2009)		180,617		$	14.72		180,617		$	18,964,580
February 2009 (February 1, 2009 to February 28, 2009)		541,228		$	14.02		541,228		$	11,378,394
March 2009 (March 1, 2009 to March 31, 2009)		106,700		$	13.37		106,700		$	9,951,739

Since the inception of the share repurchase plan, approximately 2,299,0005.2 million shares have been repurchased under the plan for approximately $30,048,000, and$66.0 million, averaging approximately $9,952,000 remains$12.75 per share, with approximately $14.0 million remaining available for repurchase, as of June 1, 2009.  

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May 28, 2012.

Set forth below is a graph comparing the five year cumulative performance of our Common Stock with the Standard & Poor’s Composite-500 Stock Index (the “S&P 500”), the Nasdaq Composite, and the Russell 2000, from March 31, 20042007 to March 31, 2009.2012.  The graph assumes that $100 was invested on March 31, 20042007 in each of our Common Stock, the S&P 500, the Nasdaq Composite, and the Russell 2000 and that all dividends were reinvested.  The performance graph and related information below shall not be deemed “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.

PetMed Express was incorporated in the state of Florida in January 1996.  The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “PETS.”  The Company began selling pet medications and other pet health products in September 1996.  In March 2010 the Company started offering for sale additional pet supplies on its website, and these items are drop shipped to customers by third party vendors. Presently, the Company’s product line includes approximately 7501,200 of the most popular pet medications, and other health products, and supplies for dogs cats, and horses.

cats.

Our discussion and analysis of our financial condition and the results of our operations are based upon our Consolidated Financial Statements and the data used to prepare them.  The Company’s 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, long term investments, 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.

The Company generates revenue by selling pet medication and health products and pet supplies primarily to retail consumers and minimally to wholesale customers.consumers.  The Company’s policy is to recognize revenue from product sales upon shipment, when the rights of ownership and risk of loss have passed to the customer.  Outbound shipping and handling fees are included in sales and are billed upon shipment.  Shipping expenses are included in cost of sales.

The majority of the Company’s sales are paid by credit cards and the Company usually receives the cash settlement in two to three banking days.  Credit card sales minimize accounts receivable balances relative to sales.  The Company maintains an allowance for doubtful accounts for losses that the Company estimates will arise from customers’ inability to make required payments, arising from either credit card charge-backs or insufficient funds checks.  The Company determines its estimates of the uncollectibility of accounts receivable by analyzing historical bad debts and current economic trends.  At March 31, 20092012 and 20082011 the allowance for doubtful accounts was approximately $59,000$5,000 and $32,000,$6,000, respectively.

Inventories consist of prescription and non-prescription pet medications health products, and pet supplies that are available for sale and are priced at the lower of cost or market value using a weighted average cost method.  The Company writes down its inventory for estimated obsolescence.  The inventory reserve was approximately $202,000$66,000 and $135,000 for the fiscal years ended$63,000 as of March 31, 20092012 and 2008,2011, respectively.

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

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

Sales increased by approximately $31,076,000,$6.7 million, or 16.5%2.9%, to approximately $219,412,000$238.3 million for the fiscal year ended March 31, 2009,2012, from approximately $188,336,000$231.6 million for the fiscal year ended March 31, 2008.2011.  The increase in sales for the fiscal year ended March 31, 20092012 was primarily due to increased retail reordersnew order and reorder sales.  The increase in new orders.  The Company has committed certain dollar amounts specifically designated towards television, direct mail/print, and onlineorder sales may be attributed to increased advertising to stimulate sales, create brand awareness, and acquire new customers.expenses, with flat customer acquisition costs.  The Company acquired approximately 802,000722,000 new customers for the year ended March 31, 2009,2012, compared to approximately 710,000645,000 new customers for the same period the prior year.  There can be no assurances that this growth trend will continue, due to increasing competition from veterinarians and traditional and online retailers.  

Sales may be adversely affected in fiscal 2013 due to increased competition and consumers giving more consideration to price and trading down to less expensive brands, including generics.  In response to these trends, the Company will maintain a more aggressive advertising and pricing strategy combined with expanding our product offerings to pet supplies and generics.  This more aggressive pricing strategy has resulted in a decrease to gross profit margins, and no guarantees can be made that the Company’s efforts will be successful, or that sales will grow in the future.  The majority of our product sales are affected by the seasons, due to the seasonality of mainly heartworm, and flea and tick medications.  For the quarters ended June 30, September 30, December 31, and March 31 of fiscal 2009,2012, the Company’s sales were approximately 31%, 27%24%, 20%21%, and 22%24%, respectively.

Cost of sales increased by $19,963,000,$10.4 million, or 17.5%7.0%, to $134,085,000$158.1 million for the fiscal year ended March 31, 2009,2012, from $114,122,000$147.7 million for the fiscal year ended March 31, 2008.2011.  The increase in cost of sales is directly related to the increase inincreased sales in fiscal 2009 as compared to fiscal 2008.and increased product costs.  As a percentpercentage of sales, the cost of sales was 61.1%66.3% in fiscal 2009,2012, as compared to 60.6%63.8% in fiscal 2008.2011.  The cost of sales percentage increase can be mainly attributed to more aggressive sales pricing and increases in our product costs, offset by a reduction in freight expenses due to a shift from priority to standard shipping.

costs.

Gross profit increaseddecreased by $11,114,000,$3.8 million, or 15.0%4.5%, to $85,328,000$80.2 million for the fiscal year ended March 31, 2009,2012, from $74,214,000$84.0 million for the fiscal year ended March 31, 2008.2011.  Gross profit as a percentage of sales for fiscal 20092012 and 20082011 was 38.9%33.7% and 39.4%36.2%, respectively.  The gross profit percentage decrease can be mainly attributed to more aggressive sales promotions and increases in our product costs, offset by a reduction in freight expenses due to a shift from priority to standard shipping.

costs.

Advertising expenses increased by approximately $3,446,000,$3.0 million, or approximately 13.6%11.0%, to approximately $28,707,000$30.4 million for the fiscal year ended March 31, 20092012, from approximately $25,261,000$27.4 million for the fiscal year ended March 31, 2008.2011.  The increase in advertising expenses for fiscal 2012 can be mainly attributed to a more aggressive advertising strategy during the fiscal year ended March 31, 2009 was due to the Company’s plan to commit certain amounts specifically designated towards television, direct mail/print, and online advertising to stimulate sales, create brand awareness, and acquire new customers.year.  The advertising costcosts of acquiring a new customer, defined as total advertising costcosts divided by new customers acquired, was $36$42 for both the fiscal years ended March 31, 20092012 and 2008.2011.  Advertising cost of acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising creative, increased advertising spending, and price competition.  Historically, the advertising environment fluctuates due to supply and demand.  A more favorable advertising environment may positively impact future new order sales, whereas a less favorable advertising environment may negatively impact future new order sales.

Cost of sales increased by $1.3 million, or 0.9%, to $147.7 million for the fiscal year ended March 31, 2011, from veteri narians$146.4 million for the fiscal year ended March 31, 2010.  The increase in cost of sales is directly related to increased product costs.  As a percentage of sales, cost of sales was 63.8% in fiscal 2011, as compared to 61.4% in fiscal 2010.  The cost of sales percentage increase can be mainly attributed to more aggressive sales promotions, reduced product retail pricing, and increases in our product costs.

Historically, the advertising environment fluctuates due to supply and demand.  A more favorable advertising environment may positively impact future new order sales, whereas a less favorable advertising environment may negatively impact future new order sales.  As a percentage of sales, advertising expense was 13.1% in fiscal 2009, as compared to 13.4% in fiscal 2008.11.8 % and 11.6% for the years ended March 31, 2011 and 2010, respectively.  The decreaseincrease in advertising expense as a percentage of total sales for fiscal 2009the year ended March 31, 2011 can be attributed to increaseddecreased sales withand increased new customer acquisition costs remaining relatively flat.due to a reduction in response rates, as a result of increased competition and softer demand.  The Company currently anticipates advertising as a percentage of sales to range frombe approximately 12.0% to 13.0% in13% for fiscal 2010.2012.  However, the advertising percentage will fluctuate quarter to quarter due to seasonality and advertising availability.  For the fiscal year ended March 31, 2009,2011, quarterly advertising expenses as a percentage of sales ranged between 11%10% and 15%14%.

Depreciation and amortization increased by approximately $225,000,$54,000, or 38.1%4.1%, to approximately $815,000$1.4 for the fiscal year ended March 31, 20092011, from approximately $590,000$1.3 million for the fiscal year ended March 31, 2008.2010.  This increase to depreciation and amortization expense for fiscal 2009the year ended March 31, 2011 can be attributed to an increase in new property and equipment additions relating to the warehouse, pharmacy, and customer care call centers expansion incenter over the past 2 fiscal 2009.

years.

Other income decreasedincreased by approximately $960,000, or 39.7%,$53,000, to approximately $1,456,000$253,000 for the fiscal year ended March 31, 2009,2011 from approximately $2,416,000$200,000 for the fiscal year ended March 31, 2008.2010.  The decreaseincrease to other income can be primarily attributed to decreased interest income due to a reduction in interest rates and a reduced cash balance due tofor the Company’s share repurchase plan.  The decreaseyear ended March 31, 2011 can also be attributed to a reduction in advertising revenue generated from our website.  Also, during fiscal 2009, the Company booked a charge of $140,000 inincreased interest and penalties due to a late payment of federal income taxes.income.  Interest income may decrease in the future due to a reduction in interest rates and also as the Company utilizes its cash balances on its $20,000,000 share repurchase plan, with approximately $9,952,000$17.7 million remaining as of May 29, 2009,March 31, 2011, on any quarterly dividend payment, or on its operating activities.

For the fiscal years ended March 31, 20092011 and 2008,2010, the Company recorded an income tax provision for approximately $12,680,000$12.4 and $10,389,000,$14.7 million, respectively.  The effective tax rate for the fiscal years ended March 31, 20092011 and 20082010 were 35.6%37.3% and 34.2%36.2%, respectively.  The effective tax rate increase can befor the year ended March 31, 2011 was attributed to ana one-time $280,000 tax charge to reconcile the remaining net operating loss carryforward in the first quarter of fiscal 2011.  The Company estimates its effective tax rate will be approximately 37.0% for fiscal 2012.

Net income decreased by approximately $308,000 that was recognized in fiscal 2008, which relates$5.1 million, or 19.7%, to an income tax over-accrualapproximately $20.9 million for the fiscal year ended March 31, 2007.  During the first quarter of fiscal 2008, it was determined that the Company was no longer a full tax payer in the state of Florida, due to the fact that it established nexus in another state.  This event triggered a lower effective tax rate in fiscal 2008.  The Company estimates its effective tax rate to be2011 from approximately 36.0% in fiscal 2010.

Net income

Net income increased by approximately $2,954,000, or 14.8%, to approximately $22,976,000$26.0 million for the fiscal year ended March 31, 2009 from approximately $20,022,000 for the fiscal year ended March 31, 2008.2010.  The increasedecrease was mainly attributable to the reduction in gross profit margin and new order sales in fiscal 2011.

The Company’s sales growth and our success in leveraging our operating and advertising expenses.

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Fiscal 2008 Compared to Fiscal 2007

Sales

Sales increased by approximately $26,090,000, or 16.1%, to approximately $188,336,000 for the fiscal year endedworking capital at March 31, 2008, from2012 and 2011 was approximately $162,246,000 for the fiscal year ended March 31, 2007.$78.2 million and approximately $80.6 million, respectively.  The increase$2.4 million decrease in sales for the fiscal year ended March 31, 2008working capital was primarily dueattributable to increased retail reordersshare repurchases and new orders,dividends paid during fiscal 2012, offset by decreased wholesale sales.  The Company has committed certain dollar amounts specifically designated towards television, direct mail/print, and online advertising to stimulate sales, create brand awareness, and acquire new customers.  The Company acquired approximately 710,000 new customers for the year ended March 31, 2008, compared to approximately 681,000 new customers for the same period the prior year.  There can be no assurances that this growth trend will continue, due to increased price competitioncash flow generated from veterinarians and traditional and online retailers. &n bsp;

The following chart illustrates sales by various sales classifications:

Year Ended March 31,
	2008			%			2007			%			$ Variance			% Variance
Reorder Sales	$	134,349,000		71.3	%		$	110,540,000		68.1	%		$	23,809,000		21.5	%
New Order Sales	$	53,766,000		28.6	%		$	51,096,000		31.5	%		$	2,670,000		5.2	%
Wholesale Sales	$	221,000		0.1	%		$	610,000		0.4	%		$	(389,000)		-63.6	%
Total Net Sales	$	188,336,000		100.0	%		$	162,246,000		100.0	%		$	26,090,000		16.1	%
Internet Sales	$	122,484,000		65.0	%		$	100,916,000		62.2	%		$	21,568,000		21.4	%
Contact Center Sales	$	65,852,000		35.0	%		$	61,330,000		37.8	%		$	4,522,000		7.4	%
Total Net Sales	$	188,336,000		100.0	%		$	162,246,000		100.0	%		$	26,090,000		16.1	%

Leading up to the 2004 presidential election we experienced an increase in the advertising cost of acquiring a new customeroperations and a decrease in new customer sales, which may have been attributed to a shortage of television advertising inventory.  There can be no assurances that the 2008 presidential election will not have a similar impact on the advertising cost of acquiring a new customerlong term investments.  Net cash provided by operating activities was $20.4 million and new customer sales.

The majority of our product sales are affected by the seasons, due to the seasonality of mainly heartworm, and flea and tick medications.  For the quarters ended June 30, September 30, December 31, and March 31 of fiscal 2008, the Company’s sales were approximately 31%, 27%, 20%, and 22%, respectively.

Cost of sales

Cost of sales increased by $16,442,000, or 16.8%, to $114,122,000 for the fiscal year ended March 31, 2008, from $97,680,000 for the fiscal year ended March 31, 2007.  The increase in cost of sales is directly related to the increase in retail sales in fiscal 2008 as compared to fiscal 2007.  As a percent of sales, the cost of sales was 60.6% in fiscal 2008, as compared to 60.2% in fiscal 2007.  The percentage increase can be mainly attributed to increases in our product and freight costs offset by a shift in our product mix to higher margin items.

Gross profit

Gross profit increased by $9,648,000, or 14.9%, to $74,214,000 for the fiscal year ended March 31, 2008, from $64,566,000 for the fiscal year ended March 31, 2007.  Gross profit as a percentage of sales for fiscal 2008 and 2007 was 39.4% and 39.8%, respectively.  The gross profit percentage decrease can be mainly attributed to increases in our product and freight costs offset by a shift in our product mix to higher margin items.

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General and administrative expenses

General and administrative expenses increased by $3,074,000, or 17.8%, to $20,367,000 for the fiscal year ended March 31, 2008 from $17,293,000 for the fiscal year ended March 31, 2007.  General and administrative expenses as a percentage of sales was 10.8% compared to 10.6%$30.1 million for the fiscal years ended March 31, 20082012 and 2007, respectively.  The increase in general and administrative expenses for the fiscal year ended March 31, 2008 was primarily due to the following: a $1,981,000 increase in payroll expenses, with $584,000 of the increase due to the recognition of additional stock based compensation expense during the fiscal year relating to the issuance of restricted stock and stock options, with $295,000 of the increase due to withholding tax expense relating to restricted stock issuances in fiscal 2007 and 2008, and the remaining amount attributed to the addition of new employees in the customer care and pharmacy departments enabling the Company to sustain its growth; a $692,000 increase in credit card and bank service fees which is directly attributable to increased sales in the fiscal year; a $386,000 one-time charge due to the fact that nexus was established in another state, relating to state/county sales tax which was not collected on behalf of our customers in fiscal 2007; a $175,000 increase in office expenses which can be directly attributed to increased sales; and a $97,000 increase in property expenses which can be directly attributed to increased sales; with a $78,000 decrease in license fees; a $65,000 decrease in professional fees; a $55,000 decrease in telephone expense; a $41,000 decrease in insurance expense; and a $18,000 decrease in other expenses, including travel and bad debt expenses, offsetting the increase.

Advertising expenses

Advertising expenses increased by approximately $18,000, or approximately 0.1%, to approximately $25,261,000 for the fiscal year ended March 31, 2008 from approximately $25,243,000 for the fiscal year ended March 31, 2007.  The slight increase in advertising expenses for the fiscal year ended March 31, 2008 was due to the Company’s plan to commit certain amounts specifically designated towards television, direct mail/print, and online advertising to stimulate sales, create brand awareness, and acquire new customers.  

The advertising cost of acquiring a new customer, defined as total advertising cost divided by new customers acquired, for the fiscal year ended March 31, 2008 was $36, compared to $37 for the same period the prior year.  Advertising cost of acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising creative, increased advertising spending, and price competition from veterinarians and other retailers of pet medications.  Historically, the advertising environment fluctuates due to supply and demand.  A less favorable advertising environment may negatively impact future new order sales.  As a percentage of sales, advertising expense was 13.4% in fiscal 2008, as compared to 15.6% in fiscal 2007.  The decrease in advertising expense as a percentage of total sales for fiscal 2008 can be attributed to increased sales with a slight improvement in ne w customer acquisition costs during the year.  The Company currently anticipates advertising as a percentage of sales to range from approximately 13.0% to 14.0% in fiscal 2009.  However, the advertising percentage will fluctuate quarter to quarter due to seasonality and advertising availability.  For the fiscal year ended March 31, 2008, quarterly advertising expenses as a percentage of sales ranged between 11% and 16%.

Depreciation and amortization

Depreciation and amortization increased by approximately $60,000, or 11.2%, to approximately $590,000 for the fiscal year ended March 31, 2008 from approximately $530,000 for the fiscal year ended March 31, 2007.  This increase to depreciation and amortization expense for fiscal 2008 can be attributed to an increase in new property and equipment additions in fiscal 2008.

Other income

Other income increased by approximately $715,000, or 42.0%, to approximately $2,416,000 for the fiscal year ended March 31, 2008, from approximately $1,701,000 for the fiscal year ended March 31, 2007.  The increase to other income can be primarily attributed to increased interest income due to increases in the Company’s cash balance, which is swept into an interest-bearing overnight account, and a tax-free investment account.  The increase can also be attributed to additional advertising revenue generated from our website.  Interest income may decrease in the future due to a reduction in interest rates and also as the Company utilizes its cash balances on its $20,000,000 share repurchase plan, with approximately $8,399,000 remaining, or on its operating activities.

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Provision for income taxes

For the fiscal years ended March 31, 2008 and 2007, the Company recorded an income tax provision for approximately $10,389,000 and $8,757,000, respectively.  The income tax provision for fiscal 2008 includes a tax benefit of approximately $308,000 which relates to an income tax over-accrual for the fiscal year ended March 31, 2007.  During the first quarter of fiscal 2008, it was determined that the Company was no longer a full tax payer in the state of Florida, due to the fact that it established nexus in another state.  This event triggered a lower effective tax rate in fiscal 2008.  The Company also recognized a $155,000 income tax benefit due to the disqualifying disposition of certain incentive stock option exercises during fiscal 2008.  These events resulted in an effective tax rate of 34.2% for the year ended March 31, 2008, compared to an effective tax rate of 37.7% for the year ended March 31, 2007.  The Company estimates its effective tax rate to be approximately 36.0% in fiscal 2009.

Net income

Net income increased by approximately $5,578,000, or 38.6%, to approximately $20,022,000 for the fiscal year ended March 31, 2008 from approximately $14,444,000 for the fiscal year ended March 31, 2007.  The increase was mainly attributable to the Company’s sales growth and our success in leveraging our operating expenses.

Liquidity and Capital Resources

The Company’s working capital at March 31, 2009 and 2008 was approximately $54,630,000 and approximately $38,804,000, respectively.  The $15,826,000 increase in working capital was primarily attributable to redemptions of long term investments, cash flow generated from operations, interest income earned on investments, and the exercise of stock options, offset by the repurchase of shares pursuant to the Company’s stock repurchase plan.  Net cash provided by operating activities was $14,966,000 and $19,380,000 for the fiscal years ended March 31, 2009 and 2008, respectively.  Net cash provided by investing activities was $11,179,000 and $9,102,000 for the fiscal years ended March 31, 2009 and 2008,2011, respectively.  This change can be attributed to an increased amountincrease in the Company’s inventory balance due to buying opportunities during fiscal 2012, compared to a more significant decrease in the Company’s inventory balance for fiscal 2011, along with a reduction in net income for fiscal 2012.  Net cash provided by investing activities was $11.6 million for the year ended March 31, 2012, compared to net cash used in investing activities of property and equipment purchases$10.8 million for our warehouse, pharmacy and customer care departments, the redemption of short and lo ngyear ended March 31, 2011.  This change can be attributed to a decrease in the Company’s long term investments and the acquisition of a $485,000 intangible asset induring fiscal 2009.2012.  Net cash used in financing activities was $16,287,000$34.9 million and $8,531,000$22.8 million for fiscal 2009the years ended March 31, 2012 and 2008,2011, respectively.  This change was primarily due to the Company repurchasing 1,347,000approximately 2.1 million shares of its common stock for approximately $18,448,000 during$23.7 million for fiscal 2009,2012, compared to the Company repurchasing 952,000791,000 shares of its common stock for approximately $11,601,000 during fiscal 2008, offset by the exercise of approximately 225,000 shares of stock options for approximately $1,893,000$12.2 million in fiscal 2009, compared to2011.  For the years ended March 31, 2012 and 2011 the Company paid approximately 292,000 shares of stock options exercised for approximately $2,785,000$10.9 million and $10.7 million in the prior fiscal year.dividends.  As of March 31, 20092012 the Company had approximately $9,952,000$14.0 million remaining under the Company’s share repurchase plan.  BasedSubsequent to March 31, 2012, the Company’s Board of Directors declared a $0.15 per share dividend on May 4, 2012.  The Board established a May 14, 2012 record date and a May 25, 2012 payment date.  Depending on future market conditions the Company may utilize its cash and cash equivalents on the remaining balance of its current share repurchase plan.

plan, on quarterly dividends, or on its operating activities.