PART I - FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS.

PETMED EXPRESS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except for per share amounts)

See accompanying notes to condensed consolidated financial statements.statements.

PETMED EXPRESS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

condensed consolidated statementS of COMPREHENSIVE INCOME

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

See accompanying notes to condensed consolidated financial statements.statements.

PETMED EXPRESS, INC. AND SUBSIDIARIES

condensed consolidated statementS of cash flows

(In thousands)(Unaudited)

See accompanying notes to condensed consolidated financial statements.statements.

PETMED EXPRESS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4:5: Fair Value

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

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

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

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

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. At December 31, 2017,June 30, 2020, the Company had invested the majority of its $81.0$86.8 million cash and cash equivalents balance in money market funds which are classified within level 1.

Note 89: SubSubsequent Eventssequent Event

On or about January 19, 2018, the plaintiffs voluntarily dismissed the consolidated putative securities class action lawsuit, filed in August and September 2017, without prejudice.s

On January 22, 2018July 20, 2020, ourthe Board of Directors declared an increaseda quarterly dividend of $0.25$0.28 per share.  The Board established a February 5, 2018July 31, 2020 record date and aan February 16, 2018August 7, 2020 payment date.  Based on the outstanding share balance as of January 30, 2018July 31, 2020 the Company estimates the dividend payable to be approximately $5.6 million.

Effective $5.2July 31, 2020, and in accordance with Amendment No. million.8 to the Executive Employment Agreement (“Amendment No.8”) with Menderes Akdag (“Mr. Akdag”), CEO and President of PetMed Express, Inc., which was entered into on July 31, 2020 and expires July 31, 2021, Mr. Akdag’s salary was increased from $607,880 to $626,860, and he was granted 37,800 restricted shares of the Company’s common stock to vest on July 31, 2021.  Mr. Akdag’s compensation was based on the results of his fiscal 2020 performance goals, which included: (1) net revenue, (2) operating profit, (3) employee engagement survey, and (4) net promoter score which measures customer satisfaction with the Company.  Subject to the Company and Mr. Akdag entering into an extension of the Executive Employment Agreement for an additional one year period following the expiration of Amendment No.8, Mr. Akdag’s 2021 compensation will be based on the achievement of the following fiscal 2021 goals, on a percentage basis: (1) net revenue (35%), (2) net income (35%), (3) new order sales (20%), and (4) employee engagement survey (10%).

On July 31, 2020, the Board of Directors approved the issuance of 37,800 restricted shares to the Company’s CEO, under the terms of the CEO’s amended Executive Employment Agreement, and 30,390 restricted shares to certain employees of the Company, pursuant to the 2016 Employee Plan. The Board also approved the issuance of 37,500 restricted shares to the independent directors, pursuant to the 2015 Director Plan.

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

Executive Summary

PetMed Express was incorporated in the state of Florida in January 1996. The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “PETS.”“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 3,0002,500 SKUs of the most popular pet medications, health products, and supplies for dogs, cats, and cats.horses.

The Company markets its products through national advertising campaigns which aim to increase the recognition of the “1-800-PetMeds” brand name, and “PetMeds” family of trademarks, increase traffic on its website at www.1800petmeds.com,www.petmeds.com, acquire new customers, and maximize repeat purchases. Approximately 84%85% of all sales were generated via the Internet for the quarter ended December 31, 2017,June 30, 2020, compared to 83%84% for the quarter ended December 31, 2016.June 30, 2019. The Company’s sales consist of products sold mainly to retail consumers. The three-month average purchase was approximately $86$89 and $81$86 per order for the quarters ended December 31, 2017June 30, 2020 and 2016, respectively, and for the nine months ended December 31, 2017 and 2016, the average purchase was approximately $86 and $82 per order,2019, respectively.

Critical Accounting Policies

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

Revenue recognition

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

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

The Company maintains an allowance for doubtful accounts for losses that the Company estimates will arise from customers’ inability to make required payments, arising from either credit card charge-backs or insufficient funds checks. The Company determines its estimates of the uncollectibilityun-collectability of accounts receivable by analyzing historical bad debts and current economic trends. The allowance for doubtful accounts was approximately $26,000$41,000 at December 31, 2017June 30, 2020, compared to $27,000$59,000 at March 31, 2017.2020.

Valuation of inventory

Inventories consist of prescription and non-prescription pet medications and pet supplies that are available for sale and are priced at the lower of cost or marketnet realizable value using a weighted average cost method. The Company writes down its inventory for estimated obsolescence. The inventory reserve was approximately $55,000$108,000 at December 31, 2017June 30, 2020 compared to $51,000$45,000 at March 31, 2017.2020.

Advertising

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

Accounting for income taxes

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

Results of Operations

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

Three Months Ended December 31, 2017June 30, 2020 Compared With Three Months Ended December 31, 2016, and Nine Months Ended December 31, 2017 Compared With Nine Months Ended December 31, 2016Ended June 30, 2019

COVID-19

As an essential business, 1-800-PetMeds has been open during our normal business hours without any material disruptions to our operations. Due to COVID-19, consumer demand has increased for the e-commerce channel with pet owners shifting their purchases to online. We are dedicated to making every effort to ensure the health and safety of our employees. We have implemented working from home where possible and enhanced disinfection and social distancing within our work place. We are also dedicated to making every effort to ensure our customers’ pets receive the medications they need. See risk factor “The recent outbreak of the COVID-19 global pandemic and related government, private sector and individual consumer responsive actions may adversely affect our business operations, employee availability, financial performance, liquidity and cash flow for an unknown period of time” in Part I, Item 1A of our Form 10-K.

Sales

Sales increased by approximately $7.2$16.2 million, or 13.7%20%, to approximately $60.1$96.2 million for the quarter ended December 31, 2017,June 30, 2020, from approximately $52.9$80.0 million for the quarter ended December 31, 2016. For the nine months ended December 31, 2017, sales increased by approximately $20.3 million, or 10.9%, to approximately $206.5 million compared to $186.1 million for the nine months ended December 31, 2016.June 30, 2019. The increasesincrease in sales for the three and nine months ended December 31, 2017 wereJune 30, 2020 was primarily due to increased new order and reorder sales. The Company acquired approximately 106,000186,000 new customers for the quarter ended December 31, 2017,June 30, 2020 compared to approximately 99,000140,000 new customers for the same period the prior year. For the nine monthsquarter ended December 31, 2017 the Company acquired approximately 408,000 new customers, compared to 388,000 new customers for the nine months ended December 31, 2016.June 30, 2019. The following charttable illustrates sales by various sales classifications:

Going forward sales may be adversely affected due to increased competition and consumers giving more consideration to price. No guarantees can be made that sales will continue to 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 and heartworm medications. For the quarters ended June 30, September 30, December 31, and March 31 of Fiscal 2017,fiscal 2020, the Company’s sales were approximately 29%28%, 25%, 21%, and 25%26%, respectively.

Cost of sales

Cost of sales increased by approximately $1.9$11.3 million, or 5.4%19%, to approximately $38.2$69.4 million for the quarter ended December 31, 2017,June 30, 2020, from approximately $36.2$58.1 million for the quarter ended December 31, 2016. For the nine months ended December 31, 2017,June 30, 2019. The cost of sales increased by approximately $4.6 million, or 3.6%, to approximately $133.6 million compared to $129.0 million for the same period in the prior year. The increase in cost of sales iscan be directly related to the increasesincrease in sales during the quarter and nine months ended December 31, 2017. CostJune 30, 2020.As a percentage of sales, as a percentcost of sales was 63.5%72.2% and 68.5%72.7% for the quarters ended December 31, 2017June 30, 2020 and 2016, respectively, and for the nine months ended December 31, 2017 and 2016 the cost of sales was 64.7% and 69.3%,2019, respectively. The cost of sales percentage decreases are mainly attributed to a product mix shift to higher margin items, offset by additional discounts given to customers to increase sales during the quarter and nine months ended December 31, 2017.

Gross profit

Gross profit increased by approximately $5.3$4.9 million, or 31.9%23%, to approximately $26.8 million for the quarter ended June 30, 2020, from approximately $21.9 million for the quarter ended December 31, 2017, from approximately $16.6 million for the quarter ended December 31, 2016. For the nine months ended December 31, 2017 gross profit increased by approximately $15.7 million, or 27.5%, to approximately $72.9 million, compared to $57.2 million for the same period in the prior year. The increases in gross profit are directly related to increases in sales during the quarter and nine months ended December 31, 2017.June 30, 2019. Gross profit as a percentage of sales was 36.5%27.8% and 31.5%27.3% for the three monthsquarters ended December 31, 2017June 30, 2020 and 2016, respectively, and for the nine months ended December 31, 2017 and 2016,2019, respectively. The increase in gross profit was 35.3% and 30.7%, respectively. The gross profit percentage increases foris directly related to the quarter and nine months ended December 31, 2017 are mainly attributed to a product mix shift to higher margin items, offset by additional discounts given to customers to increase in sales during the quarter and nine months.ended June 30, 2020.

General and administrative expenses

General and administrative expenses increased by approximately $457,000,$1.2 million, or 8.5%19%, to approximately $5.8$7.8 million for the quarter ended December 31, 2017,June 30, 2020, from approximately $5.4$6.5 million for the quarter ended December 31, 2016.June 30, 2019. The increase in general and administrative expenses for the quarterthree months ended December 31, 2017June 30, 2020 was primarily due to the following: a $496,000$816,000 increase in payroll expenses relatedof which $430,000 was due to increased stock compensation expense; a $164,000an increase in bank service fees; and an $18,000 increase in professional fees. Offsetting the increase was a $198,000 decrease to propertystock-related compensation expenses; a $20,000 decrease to telephone expenses; and a $3,000 net decrease in other expenses which included licenses, insurance expenses, and bad debt expenses.

For the nine months ended December 31, 2017, general and administrative expenses increased by approximately $1.0 million, or 5.9%, to approximately $18.2 million from approximately $17.2 million for the nine months ended December 31, 2016. The increase in general and administrative expenses for the nine months ended December 31, 2017 was primarily due to the following: a $1.3 million increase in payroll expenses related to increased stock compensation expense; a $453,000$319,000 increase in bank service fees; and a $192,000$100,000 increase in professional fees. Offsettingtelephone expenses. Approximately $240,000 of the increase was a $582,000 decrease to property expenses; a $296,000 decreasegeneral and administrative expenses were related to bad debt expense relating to decreased credit card chargebacks for the period; a $40,000 decrease in licenses and fees; and a $25,000 net decrease in other expensesCOVID-19, which included insurancepayroll and telephone expenses, telephone,due to increased hours to meet the increased demand and travel expenses.employees working from home.

Advertising expenses

Advertising expenses increased by approximately $956,000,$409,000, or 30.2%4.7%, to approximately $4.1$9.0 million for the quarter ended December 31, 2017,June 30, 2020, from approximately $3.2$8.6 million for the quarter ended December 31, 2016. For the nine months ended December 31, 2017, advertising expenses increased by approximately $1.6 million, or 12.3%, to approximately $14.9 million compared to advertising expenses of approximately $13.3 million for the nine months ended December 31, 2016.June 30, 2019. The increasesincrease in advertising expenses for the three and nine months ended December 31, 2017quarter was intended to stimulate sales and acquire new customers.consistent with the Company’s 2021 marketing plan. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, increased to $39was $48 for the quarter ended December 31, 2017,June 30, 2020 compared to $32$62 for the quarter ended December 31, 2016. For the nine months ended December 31, 2017 and 2016 the advertising costs of acquiring a new customer were $37 and $34, respectively.June 30, 2019. Advertising cost of acquiring a new customer can be impacted by the advertising environment, the effectiveness of our advertising creative, advertising spending, and price competition. Historically, the advertising environment fluctuates due to supply and demand. A more favorable advertising environment may positively impact future new order sales, whereas a less favorable advertising environment may negatively impact future new order sales.

As a percentage of sales, advertising expense was 6.8%9.4% and 6.0%10.8% for the quarters ended December 31, 2017June 30, 2020 and 2016, respectively, and for both of the nine months ended December 31, 2017 and 2016 advertising expense was 7.2%.2019, respectively. The increasedecrease in advertising expense as a percentage of total sales for the quarter ended December 31, 2017June 30, 2020 can be mainly attributed to increased efficiency of the advertising spending to stimulate sales and acquire new customers.promote brand awareness. The Company currently anticipates advertising as a percentage of sales to be between approximately 7.0% and 8.0%9.0% for fiscal 2018.2021. However, the advertising percentage will fluctuate quarter to quarter due to seasonality and advertising availability.

Depreciation

Depreciation expense increased by approximately $75,000 to approximately $532,000was $562,000 and $568,000 for the quarterquarters ended December 31, 2017, from approximately $457,000 for the quarter ended December 31, 2016. For the nine months ended December 31, 2017 depreciation expense increased by approximately $735,000 to $1.6 million compared to $855,000 for the same period in the prior year. The increasesJune 30, 2020 and 2019, respectively. This slight decrease to depreciation expense for the quarter and nine months ended December 31, 2017June 30, 2020 can be attributed to an increase infewer new property and equipment additions relatedduring the quarter, compared to the Company’s new corporate headquarters and distribution facility which were placed into service in fiscal 2017.previous quarters.

Other income

Other income increaseddecreased by approximately $290,000$479,000, to approximately $456,000$345,000 for the quarter ended December 31, 2017 fromJune 30, 2020 compared to approximately $166,000$824,000 for the quarter ended December 31, 2016. For the nine months ended December 31, 2017 other income increased by approximately $870,000 to approximately $1.2 million compared to approximately $302,000 for the same period in the prior year.June 30, 2019. The increasesdecrease to other income for the quarter and nine months ended December 31, 2017 areJune 30, 2020 is primarily related to increased rental and advertising revenue, and increaseddecreased interest income.income due to decreased interest rates. Interest income may decrease in the future as the Company utilizes its cash balances on its share repurchase plan, with approximately $10.2$28.7 million remaining as of December 31, 2017,June 30, 2020, on any quarterly dividend payment, or on its operating activities.

Provision for income taxes

For the quarters ended December 31, 2017June 30, 2020 and 2016,2019, the Company recorded an income tax provision of approximately $2.9$2.0 million and $3.0 million, respectively, and for the nine months ended December 31, 2017 and 2016, the Company recorded an income tax provision of approximately $12.2 million and $9.8$1.6 million, respectively. The decrease toincrease in the income tax provision for the three monthsquarter ended December 31, 2017, is related to an income tax rate reduction pursuant to the Tax Cuts and Jobs Act of 2017 (“2017 Act”), offset by an increase in operating income. The increase to the income tax provision for the nine months ended December 31, 2017,June 30, 2020 is related to an increase in operating income offset byduring the incomequarter. The effective tax rate reduction due tofor the 2017 Act.quarters ended June 30, 2020 and 2019 were approximately 20.6% and 23.5%, respectively. The decrease in the effective tax rate for the quarter ended December 31, 2017 was approximately 24.0%, compared to 38.3% for the quarter ended December 31, 2016, and the effective tax rate for the nine months ended December 31, 2017 was approximately 31.1%, compared to 37.5% for the nine months ended December 31, 2017. The decreaseJune 30, 2020 is related to the company receiving a one-time state income tax refund of $285,000 during the quarter. The Company estimates its effective rate for the three and nine months ended December 31, 2017 is due to a reduction in the Company’s corporate tax rate pursuant to the 2017 Act. In accordance with SEC Staff Bulletin No. 118, fiscal year end companies were required to determine the appropriate blended rate to apply based on their respective fiscal year end dates. Therefore, instead of applying a 35.0% federal tax rate for the quarter and nine months ended December 31, 2017, the Company applied a blended federal rate of 31.5%. This blended rate was applied to the nine months ended December 31, 2017, resulting in a tax benefit ofwill be approximately $1.7 million, which also included a one-time $384,000 reduction to our deferred tax liabilities due to the federal tax rate reduction. The Company also recognized a one-time charge of $175,000 related to a true up of the fiscal 2017 income tax provision, which was recognized in the quarter ended December 31, 2017. Due to the passage of the 2017 Act the company expects an effective tax rate of approximately 34.0% for the quarter ending March 31, 2018, and an effective tax rate of approximately 24.0%23.5% for fiscal 2019.2021.

Liquidity and Capital Resources

The Company’s working capital at December 31, 2017June 30, 2020 and March 31, 20172020 was $80.7$106.7 million and $63.4$104.7 million, respectively. The $17.3$2.0 million increase in working capital was primarily attributable to cash flowincome generated fromby operations, offset by dividends paid.paid in the period. Net cash used in operating activities was $11.2 million for the three months ended June 30, 2020, compared to cash provided by operating activities was $35.1 million and $31.6 millionoperations of $36,000 for the ninethree months ended December 31, 2017 and 2016, respectively.June 30, 2019. This change can beis mainly attributed to an increase in the Company’sinventory, offset by an increase to net income, and increases in account payables and income taxes payable offsetfor the quarter ended June 30, 2020. We have not seen any material disruptions in our supply chain, but as a precaution we temporarily increased our inventory by increases in$25.2 million during the Company’s inventory balance, compared to the same period in the prior year.quarter ended June 30, 2020. Net cash used in investing activities decreased to $564,000was $145,000 for the ninethree months ended December 31, 2017,June 30, 2020, compared to net cash$192,000 used in investing activities of $9.9 million for the ninethree months ended December 31, 2016.June 30, 2019. This change in investing activities is related to increaseddecreased property and equipment additions related to the Company’s new corporate headquarters and distribution facility in Delray Beach, Floridaacquired in the previous fiscal year.quarter. Net cash used in financing activities was $12.3$5.6 million for the nine monthsquarter ended December 31, 2017,June 30, 2020 compared to $11.5$17.0 million for the same periodquarter ended June 30, 2019. The decrease to financing activities relates to the Company purchasing approximately 613,000 shares of its common stock for approximately $11.5 million during the quarter ended June 30, 2019 and no such purchases in the prior year, which represented an increase in dividends paid in the periodquarter ended December 31, 2017.June 30, 2020.

At December 31, 2017,June 30, 2020, the Company had approximately $10.2$28.7 million remaining under the Company’s share repurchase plan. Subsequent to December 31, 2017, on January 22, 2018On July 20, 2020 our Board of Directors declared an increased quarterly dividend of $0.25a $0.28 per share.share dividend. The Board established a February 5, 2018July 31, 2020 record date and a February 16, 2018an August 7, 2020 payment date. Depending on future market conditions the Company may utilize its cash and cash equivalents on the remaining balance of its current share repurchase plan, on quarterly dividends, or on its operating activities.

At December 31, 2017,June 30, 2020, the Company had no material outstanding lease commitments. We are not currently bound by any longlong- or short termshort-term agreements for the purchase or lease of capital expenditures. Any material amounts expended for capital expenditures would be the result of an increase in the capacity needed to adequately provide for any increase in our business. To date we have paid for any needed additions to our capital equipment infrastructure from working capital funds and anticipate this being the case in the future. Presently, we have approximately $300,000$1.5 million forecasted for capital expenditures for the remainder of fiscal 2018,2021, the majority of which will be invested in our e-commerce platform to better service our customers, which will be funded through cash from operations. The Company’s primary source of working capital is cash from operations. The Company presently has no need for alternative sources of working capital, and has no commitments or plans to obtain additional capital.

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements at December 31, 2017.June 30, 2020.

Cautionary Statement Regarding Forward-Looking Information

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

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk generally represents the risk that losses may occur in the value of financial instruments as a result of movements in interest rates, foreign currency exchange rates,, and commodity prices. Our financial instruments include cash and cash equivalents, accounts receivable, and accounts payable. The book values of cash equivalents, accounts receivable, and accounts payable are considered to be representative of fair value because of the short maturity of these instruments. Interest rates affect our return on excess cash and cash equivalents. At December 31, 2017,June 30, 2020, we had $81.0$86.8 million in cash and cash equivalents, aand 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 money market funds.cash and cash equivalents. Our investmentscash and cash equivalents are subject to market risk, primarily interest rate and credit risk. Our investmentscash and cash equivalents are managed by a limited number of outside professional managers within investment guidelines set by our Board of Directors. Such guidelines include security type, credit quality, and maturity, and are intended to limit market risk by restricting our investmentscash and cash equivalents to high-quality debt instrumentscash and cash equivalents with both shortshort- and long termlong-term maturities. We do not hold any derivative financial instruments that could expose us to significant market risk. At December 31, 2017,June 30, 2020, we had no debt obligations.

ITEM 4.CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company’sCompany’s management, including our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended) as of the quarter ended December 31, 2017,June 30, 2020, the end of the period covered by this report (the "Evaluation Date"). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective such that the information relating to our Company, including our consolidated subsidiaries, required to be disclosed by the Company in reports that it files or submits under the Exchange Act: (1) is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and (2) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during our most recently completed fiscal quarter that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

part ii - other information

ITEM 1.       LEGAL PROCEEDINGS.

None.

ITEM 1.LEGAL PROCEEDINGS.

None.

ITEM1A.RISK FACTORS.

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations, and trading price of our commoncommon stock. Please refer to our Annual Report on Form 10-K for Fiscal Year 2017fiscal 2020 for additional information concerning these and other uncertainties that could negatively impact the Company.

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

The Company did not make any sales of unregistered securities during the thirdfirst quarter of Fiscal 2018.fiscal 2021.

Issuer PurchasesPurchases of Equity Securities

None.None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES.

None.None.

ITEM 4.       MINE SAFETY DISCLOSURES.

Not applicable.applicable.

ITEM 5.OTHER INFORMATION.

None.

ITEM 6.       EXHIBITS

The following exhibits are filed as part of this report.

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

signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PETMED EXPRESS, INC.

Date: January 30, 2018

By:  /s/ Menderes Akdag                      

            Menderes Akdag

 Chief Executive Officer and President

     (principal executive officer)

By:  /s/ Bruce S. Rosenbloom               

            Bruce S. Rosenbloom

      Chief Financial Officer

      (principal financial and accounting officer)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,, D.C.20549 D.C. 20549

_______________________

PETMED EXPRESS, INC

_______________________

FORM 10-Q

FOR THE QUARTER ENDED:

DECEMBER 31, 2017JUNE 30, 2020

_______________________

EXHIBITS

_______________________