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 3,000 SKUs of the most popular pet medications, health products, and supplies for dogs, cats, and horses.

The Company markets its products through national advertising and promotional campaigns which aim to increase the recognition of the “PetMeds”“PetMeds®” brand name, increase traffic on its website at www.petmeds.com, acquire new customers, and maximize repeat purchases. Approximately 83%86% of all sales were generated via the Internet for both the quartersquarter ended SeptemberJune 30, 2021 and 2020.2022, compared to 84% for the quarter ended June 30, 2021. The Company’s sales consist of products sold mainly to retail consumers. The three-month average purchase was approximately $92 and $87 per order$95 for theboth quarters ended SeptemberJune 30, 20212022 and 2020, respectively, and the six-month average purchase was approximately $93 and $88 per order for the six months ended September 30, 2021, and 2020, respectively.

Critical Accounting Policies

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

Revenue recognition

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

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

The Company 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-backschargebacks or insufficient funds checks. The Company determines its estimates of the un-collectability of accounts receivable by analyzing historical and current bad debts and current economic trends. The allowance for doubtful accounts was approximately $28,000$36,000 at SeptemberJune 30, 20212022, compared to $39,000 at March 31, 2021.2022.

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 $49,000$57,000 at SeptemberJune 30, 20212022 compared to $86,000$81,000 at March 31, 2021.2022.

Advertising

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

Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted EBITDA per share

To provide investors and the market with additional information regarding our financial results, we have disclosed (see below) adjusted EBITDA and adjusted EBITDA per share, non-GAAP financial measures that we calculate as net income excluding share-based compensation expense; depreciation and amortization; income tax provision; interest income (expense); and other expenses. We have provided reconciliations below of adjusted EBITDA to net income and adjusted EBITDA per share to diluted earnings per share, the most directly comparable GAAP financial measures.

We have included adjusted EBITDA and adjusted EBITDA per share, herein, because they are key measures used by our management and Board of Directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating adjusted EBITDA facilitates operating performance comparability across reporting periods by removing the effect of non-cash expenses. Accordingly, we believe that adjusted EBITDA and adjusted EBITDA per share provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors.

We believe it is useful to exclude non-cash charges, such as share-based compensation expense, depreciation and amortization from our adjusted EBITDA and adjusted EBITDA per share because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. We believe it is useful to exclude income tax provision and interest income (expense), as neither are components of our core business operations. We also believe that it is useful to exclude other expenses, like the investment banking fee related to the Vetster partnership, which was executed in the June quarter, due to this expense being a one-time charge related to this specific transaction. Adjusted EBITDA and adjusted EBITDA per share have limitations as financial measures, these non-GAAP measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

Because of these and other limitations, adjusted EBITDA and adjusted EBITDA per share should only be considered as supplemental to, and alongside with other GAAP based financial performance measures, including various cash flow metrics, net income, net margin, and our other GAAP results.

The following table presents a reconciliation of net income, the most directly comparable GAAP measure to adjusted EBITDA and adjusted EBITDA per share for each of the periods indicated:

Three Months Ended SeptemberJune 30, 20212022 Compared With Three Months Ended SeptemberJune 30, 2020, and Six Months Ended September 30, 2021 Compared With Six Months Ended September 30, 2020

COVID-19

We are dedicated to making every effort to ensure our customers’ pets receive the medications they need. We are also dedicated to making every effort to ensure the health and safety of our employees. We have continued with working from home where possible and enhanced disinfection and social distancing within our work place.workplace. The Company has been open during our normal business hours without any material disruptions to our operations. We have not seen any major disruptions in our supply chain,chain; however, we have experienced some delays in the delivery of some inventory items. See risk factorfactors “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” and “Shipping is a critical part of our business and any changes in, or disruptions to, our shipping arrangements could adversely affect our business, financial condition, and results of operations“ in Part I, Item 1A of our Form 10-K for the year ended March 31, 2021.2022.

Sales

Sales decreased by approximately $8.1$9.1 million, or 10.7%11.5%, to approximately $67.4$70.2 million for the quarter ended SeptemberJune 30, 2021, from2022, compared to approximately $75.4$79.3 million for the quarter ended SeptemberJune 30, 2020. For the six months ended September 30, 2021, sales decreased by approximately $24.9 million, or 14.5%, to approximately $146.7 million compared to $171.6 million for the six months ended September 30, 2020.2021. The decrease in sales for the quarter and sixthree months ended SeptemberJune 30, 2021 was primarily due to decreased new ordersorder and reorder sales. Sales for the quarter and six months ended SeptemberJune 30, 20212022 were impacted by a much more competitive environment,slow start to flea/tick and a crowded advertising marketheartworm season which had substantially higher advertising costs compared tonegatively affected the same periods infirst half of the prior year. Veterinary visits increased during the quarter compared to being down during the prior year, due to the pandemic. We believe the increase in veterinary visits was primarily due to pet owners needing to visit their veterinarian for their pets’ annual exam in order to renew their prescriptions, as many veterinarians were closed due to the pandemic.quarter. The Company acquired approximately 65,00069,000 new customers for the quarter ended SeptemberJune 30, 2021,2022, utilizing the new 36-month definition of a new customer (described below), compared to approximately 96,00092,000 new customers for the quarter ended June 30, 2021. If we were using the same period36-month definition of a new customer in 2021, then the prior year. For the six months ended September 30, 2021 the Company acquired approximately 157,000 new customers, comparedcustomer would have increased to 282,000 new customers for the six months ended September 30, 2020.115,000. The following charttable illustrates sales by various sales classifications:

Please note that the Company changed the definition of a new customer on April 1, 2022, to include anyone who has not ordered over the past thirty-six months. The reorder and new order sales amounts for three months ended June 30, 2022 reflect this change in the new customer definition. The reorder and new order sales for the three months ended June 30, 2021 do not reflect this new customer definition change. Had the Company changed the definition of a new customer in the prior year, reorder sales would have been $68.7 million instead of $70.9 million reported above, and new order sales would have been $10.6 million instead of $8.4 million reported above.

In July 2021 we launched the new AutoShip & Save subscription program (“AutoShip”) on our website. AutoShip is a new convenient way for our loyal customer base to have future pet medication orders delivered directly to them without the need to place an order each time. During the quarter ended June 30, 2022 we made a change to the methodology on how we calculate the percentage of our revenue that was generated by our AutoShip program. Going forward, we will report AutoShip sales, net of discounts and credits, and we will also report the average of our AutoShip attainment over the quarter. This change to the calculation resulted in a decrease to the AutoShip percentage that was previously reported by only a few percentage points. We believe that this change reflects a more accurate representation of our subscription business for stakeholders to gauge its performance.

We are encouraged by the adoption of our AutoShip program and have seen an increasingly positive trend over the last several quarters since we launched this program. For example, our quarterly AutoShip percentage increased from 20% in the December quarter to 31% in the March quarter and averaged 34% for the most recent quarter ended June 30, 2022. The Company has set a goal of generating approximately 50% of its sales via the AutoShip program in FY 2023.

Going forward sales may be adversely affected due to increased competition and consumers giving more consideration to price. The changes in consumer behavior post pandemic makes future sales somewhat challenging to predict. No guarantees can be made that sales will 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 2021,fiscal 2022, the Company’s sales were approximately 31%29%, 25%, 21%22%, and 23%24%, respectively, as a percentage of annual sales.

Cost of sales

Cost of sales decreased by approximately $4.2$7.3 million, or 8.0%12.7%, to approximately $48.2$50.2 million for the quarter ended SeptemberJune 30, 2021,2022, from approximately $52.4$57.5 million for the quarter ended SeptemberJune 30, 2020. For the six months ended September 30, 2021, cost of sales decreased by approximately $16.1 million, or 13.2%, to approximately $105.7 million compared to $121.8 million for the same period in the prior year.2021. The cost of sales decreasesdecrease can be directly related to the decreases todecrease in sales during the three and six monthsquarter ended SeptemberJune 30, 2021.2022. As a percentage of sales, cost of sales was 71.5%71.6% and 69.5%72.5% for the quarters ended SeptemberJune 30, 20212022 and 2020, respectively, and for the six months ended September 30, 2021, and 2020 cost of sales was 72.1% and 71.0%, respectively. The decrease in the cost of sales percentage for the quarter and six months were adversely impactedwas primarily due to the major manufacturers shifting their rebate funding from discounting product costs to cooperative marketing rebates.rebates to the reimbursement of promotion discounts which support the AutoShip subscription program.

Gross profit

Gross profit decreased by approximately $3.8$1.9 million, or 16.7%8.4%, to approximately $19.2$19.9 million for the quarter ended SeptemberJune 30, 2021,2022, from approximately $23.0$21.8 million for the quarter ended September 30, 2020. For the six months ended September 30, 2021 gross profit decreased by approximately $8.8 million, or 17.8%, to approximately $41.0 million, compared to $49.8 million for the same period in the prior year. The decrease in gross profit is directly related to a decrease in sales during the quarter and six months ended SeptemberJune 30, 2021. Gross profit as a percentage of sales was 28.5%28.4% and 30.5%27.5% for the three monthsquarters ended SeptemberJune 30, 20212022 and 2020, respectively, and for the six months ended September 30, 2021, and 2020, gross profit as a percentage of sales was 27.9% and 29.0%, respectively. The increase in the gross profit percentage decreases for the quarter and the six months can also be attributed to the major manufacturers shifting their rebate funding from discounting product costs to cooperative marketing rebates to the reimbursement of promotion discounts which support the AutoShip subscription program.

General and administrative expenses

General and administrative expenses increased by approximately $149,000,$1.4 million, or 2.2%16.3%, to approximately $6.9$9.4 million for the quarter ended SeptemberJune 30, 2021,2022, from approximately $6.8$8.0 million for the quarter ended SeptemberJune 30, 2020.2021. The increase into general and administrative expenses for the quarterthree months ended SeptemberJune 30, 20212022 was primarily due to the following: a $114,000 increase to other expenses, relating to increasing a state sales tax related accrual during the period; an $80,000$796,000 increase in professional fees;payroll expenses, the majority of which was related to stock compensation; and a $24,000 increase in travel related expenses, offset by a net decrease of $69,000 which included decreases in bank service fees and property expenses. For the six months ended September 30, 2021, general and administrative expenses increased by approximately $436,000, or 3.0%, to approximately $14.9 million, compared to $14.6 million for the same period the prior year. The increase in general and administrative expenses for the six months ended September 30, 2021 was primarily due to the following: a $418,000$464,000 increase in professional fees, with $260,000the majority of which was related to brand and marketing consultation; a $114,000 increase to other expenses, relating to increasing a state sales tax related accrual during the period; offset by a net decrease of $96,000 primarilyan investment banking fee related to a reduction in bank service fees due to a decrease in sales.the Vetster partnership and investment.

Advertising expenses

Advertising expenses decreased by approximately $1.7$1.4 million, or 33%17.3%, to approximately $3.4$6.3 million for the quarter ended SeptemberJune 30, 2021,2022, from approximately $5.1$7.7 million for the quarter ended SeptemberJune 30, 2020. For2021. Overall advertising spending for the six months ended September 30, 2021, advertising expensesquarter decreased by approximately $3.1 million, or 22%, to approximately $11.1 million compared to advertising expenses of approximately $14.2 million for the six months ended September 30, 2020. The decrease in advertising expenses forsame quarter the three months ended September 30, 2021 wasprior year, primarily due to management’s decision to reduce advertising spendthe delay of flea and tick season as a result of the colder weather in the quarter. During the quarter and six months ended September 30, 2021, while the pandemic was abating and many retail stores were re-opening, the advertising market was rapidly recovering with demand driving up advertising prices dramatically. As a result, our advertising for the three and six months ended September 30, 2021 was less effective in its ability to attract new customers.

month of April. The advertising costs of acquiring a new customer, defined as total advertising expensecosts divided by new customers acquired, was relatively flat, approximately $54$91 for the quartersquarter ended SeptemberJune 30, 2021 and 2020, and $712022 compared to $83 for the six monthsquarter ended SeptemberJune 30, 2021 compared to $50 for the six months ended September 30, 2020.2021. The increase for the six month ended September 30, 2021, was due to a substantialan increase in advertising prices.costs, compared to the same quarter in the prior year. The 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 5.1%9.1% and 6.8%9.7% for the quarters ended SeptemberJune 30, 20212022 and 2020, and for the six months ended September 30, 2021, and 2020 advertising expense was 7.6% and 8.3%, respectively. The decrease in advertising expense as a percentage of total sales for the three and six monthsquarter ended SeptemberJune 30, 20212022 can be mainly attributed to decreased salesthe slow start to flea/tick and aheartworm season which affected the first half of the quarter, which negatively impacted sales. In response to the reduction in sales the Company reduced advertising expense.spend in the quarter compared to the quarter ended June 30, 2021. The advertising percentage will fluctuate quarter to quarter due to seasonality and advertising availability, and return on investment requirements.availability.

Depreciation

Depreciation expense increased by approximately $87,000 to approximately $694,000was $753,000 and $647,000 for the quarterquarters ended SeptemberJune 30, 2022 and 2021, from approximately $607,000 for the quarter ended September 30, 2020. For the six months ended September 30, 2021 and 2020 depreciation expense was approximately $1.3 and $1.2 million, respectively. TheThis increase to depreciation expense for the quarter and six months ended SeptemberJune 30, 20212022 can be attributed to new property and equipment additions during the same periods.quarter.

Other income

Other income decreased by approximately $160,000 to approximately $244,000$315,000 for the quarter ended SeptemberJune 30, 2021 from2022 compared to approximately $404,000$369,000 for the quarter ended SeptemberJune 30, 2020. For the six months ended September 30, 2021 other income decreased by approximately $136,000 to approximately $613,000 compared to approximately $749,000 for the same period in the prior year.2021. The decrease to other income for the quarter and six months ended SeptemberJune 30, 20212022 is primarily related to decrease ina reduction to advertising income. Interest income may decrease in the future as the Company utilizes its cash balances on any quarterly dividend payment, on future investments or partnerships, on its operating activities, or on its share repurchase plan, with approximately $28.7 million remaining as of SeptemberJune 30, 2021, on any quarterly dividend payment or on its operating activities.2022.

Provision for income taxes

For the quarters ended SeptemberJune 30, 20212022 and 2020,2021, the Company recorded an income tax provision of approximately $2.0$1.0 million and $2.5 million, respectively, and for the six months ended September 30, 2021 and 2020, the Company recorded an income tax provision of approximately $3.3 million and $4.5$1.4 million, respectively. The decrease into the income tax provision for the three and six monthsquarter ended SeptemberJune 30, 20212022 is related to a decrease in operating income during the periods.quarter. The effective tax rate for the quarter ended SeptemberJune 30, 20212022 was approximately 23.8%27.1%, compared to 22.6%approximately 23.5% for the quarter ended SeptemberJune 30, 2020, and the effective tax rate for the six months ended September 30, 2021 was approximately 23.7% compared to 21.7% for the six months ended September 30, 2020.2021. The increase toin the effective tax rate for the quarter ended SeptemberJune 30, 2021 can be attributed2022 is due to more non-deductible expensesan increase in the September quarter.number of states that the Company has income tax nexus with, due to many of its employees working remotely in various states. The increase to the effective tax rate foris also related to an increase in stock compensation during the six months ended September 30, 2021 can be attributedquarter, which is expected to reverse during the Company receiving a one-time state incomefiscal year 2023 as the related compensation shares vest. The effective tax refund of $285,000rate should average out to approximately 24.5% in the June 2020 quarter.fiscal year 2023.

Liquidity and Capital Resources

The Company’s working capital at SeptemberJune 30, 20212022 and March 31, 20212022 was $117.2$110.3 million and $116.3$117.8 million, respectively. The approximately $900,000 increase$7.5 million decrease in working capital was primarily attributable to income generated by operations and a reductiondecrease in cash to accounts payable, offset by dividends paidfund the investment in the period.Vetster partnership. Net cash provided by operating activities was $1.1 million and $15.2$6.4 million for the sixthree months ended SeptemberJune 30, 2021 and 2020, respectively.2022, compared to cash used in operating activities of $422,000 for the three months ended June 30, 2021. This change is primarily due to a greater reduction in net income and a decrease in accounts payable and inventory than in the prior year, offset by a decrease in inventories.to net income. Net cash used in investing activities was $972,000$6.0 million for the sixthree months ended SeptemberJune 30, 2021,2022, compared to net cash$477,000 used in investing activities of $1.2 million for the sixthree months ended SeptemberJune 30, 2020.2021. This change in investing activities is related to an increasethe investment in the Vetster partnership and increased property and equipment additions acquired in the six months ended September 30, 2021.quarter. Net cash used in financing activities was $12.3$6.1 million for the six monthsquarter ended SeptemberJune 30, 2021,2022 compared to $11.4$6.0 million for the same period in the prior year. The change to financing activities relates to an increase in the dividend paid in the six monthsquarter ended SeptemberJune 30, 2021, compareddue to the prior period. At Septemberdeclaration of the $0.30 per share dividend during the quarters ended June 30, 2022, and 2021, respectively.

As of June 30, 2022, the Company had approximately $28.7 million remaining under the Company’s share repurchase plan.

Subsequent to September 30, 2021, on October On July 25, 20212022 our Board of Directors declared a $0.30 per share dividend. The Board of Directors established a November 8, 2021an August 12, 2022 record date and a Novemberan August 19, 20212022 payment date.date for the quarterly dividend. Depending on future market conditions the Company may utilize its cash and cash equivalents on quarterly dividends, on its operating activities, or on the remaining balance of its current share repurchase plan, on dividends, or on its operating activities.plan.

At SeptemberAs of June 30, 2021,2022, the Company had no material outstanding lease commitments. We are not currently bound by any long- or short-term agreements for the purchase or lease of capital expenditures. Any material amounts expended for capital expenditures would be the result of an increase in the capacity needed to adequately provide for any increase in our business. To date we have paid for any needed additions to our capital equipment infrastructure from working capital funds and anticipate this being the case in the future. Presently, we have approximately $1.0$4.0 million forecasted for capital expenditures for the remainder of fiscal 2022,2023, the majority of which will be invested in our e-commerce platform and IT infrastructure to better service our customers, which willand are expected to 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 September 30, 2021.

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. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended March 31, 2022 under the heading “Risk Factors.” 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. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law. 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.

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 and 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 SeptemberJune 30, 2021,2022, we had $106.6$105.4 million in cash and cash equivalents, and the majority of our cash and cash equivalents generate interest income based on prevailing interest rates. A significant change in interest rates would impact the amount of interest income generated from our excess cash and cash equivalents. It would also impact the market value of our cash and cash equivalents. Our cash and cash equivalents are subject to market risk, primarily interest rate and credit risk. Our cash and cash equivalents are managed by a limited number of outside professional managers within investment guidelines set by our Board of Directors. Such guidelines include security type, credit quality, and maturity, and are intended to limit market risk by restricting our cash and cash equivalents to high-quality cash and cash equivalents with both short- and long-term maturities. We do not hold any derivative financial instruments that could expose us to significant market risk. At SeptemberJune 30, 2021,2022, we had no debt obligations.

Evaluation of Disclosure Controls and Procedures

The Company’s management, including our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a‑15 promulgated under the Securities Exchange Act of 1934, as amended) as of the quarter ended SeptemberJune 30, 2021,2022, 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 as of the Evaluation Date, 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

None.

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations, and trading price of our common stock. Please refer to our Annual Report on Form 10-K for Fiscal Year 2021fiscal 2022 for additional information concerning these and other uncertainties that could negatively impact the Company.

The Company did not make any sales of unregistered securities during the secondfirst quarter of Fiscal 2022.fiscal 2023.

Issuer Purchases of Equity Securities

None.

None.

Not applicable.

None.

The following exhibits are filed as part of this report.

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.