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.

PETMED EXPRESS, INC. AND SUBSIDIARIES

condensed consolidated statementS ofCONDENSED CONSOLIDATED STATEMENTS COMPREHENSIVEOF INCOME

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

See accompanying notes to condensed consolidated financial statements.

PETMED EXPRESS, INC. AND SUBSIDIARIES

condensed consolidated statementS of cash flows

(In thousands)(Unaudited)

See accompanying notes to condensed consolidated financial statements.

PETMED EXPRESS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5:5: Fair Value

The Company carries various assetscash and liabilitiescash equivalents at fair value in the Condensed Consolidated Balance Sheets. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. ASC Topic 820 (“Fair Value Measurements”) establishes a three-tierthree-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, 2019, June 30, 2020, the Company had invested allthe majority of its $92.4$86.8 million cash and cash equivalents balance in money market funds which are classified within level 1.

Note 9: SubSubsequent Eventssequent Events

On January 21,July 20, 2020, ourthe Board of Directors declared a quarterly dividend of $0.27$0.28 per share.  The Board established a February 3,July 31, 2020 record date and a February 14,an August 7, 2020 payment date.  Based on the outstanding share balance as of January 28,July 31, 2020 the Company estimates the dividend payable to be approximately $5.4$5.6 million.

Effective July 31, 2020, and in accordance with Amendment No.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 2,500 SKUs of the most popular pet medications, health products, and supplies for dogs, cats, and horses.

The Company markets its products through national advertising campaigns which aim to increase the recognition of the “1-800-PetMeds” brand name, and “PetMeds” family of trademarks, increase traffic on its website at www.1800petmeds.com,www.petmeds.com, acquire new customers, and maximize repeat purchases. Approximately 84%85% of all sales were generated via the Internet for both the quartersquarter ended December 31, 2019 and 2018.June 30, 2020, compared to 84% for the quarter ended June 30, 2019. The Company’s sales consist of products sold mainly to retail consumers. The three-month average purchase was approximately $85$89 and $84$86 per order for the quarters ended December 31,June 30, 2020 and 2019, and 2018, respectively, and for the nine months ended December 31, 2019 and 2018, the average purchase was approximately $86 and $87 per order, 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;patterns, however thisit is not considered a key judgment. There are no amounts excluded from variable consideration. Revenue is recognized when control transfers to the customer at the point in time in which shipment of the product occurs. This key judgment is determined as the shipping point represents the point in time in which the Company has a present right to payment, title has transferred to the customer, and the customer has assumed the risks and rewards of ownership.

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

The Company maintains an allowance for doubtful accounts for losses that the Company estimates will arise from customers’ inability to make required payments, arising from either credit card charge-backs or insufficient funds checks. The Company determines its estimates of the uncollectibilityun-collectability of accounts receivable by analyzing historical bad debts and current economic trends. The allowance for doubtful accounts was approximately $31,000$41,000 at December 31, 2019June 30, 2020, compared to $39,000$59,000 at March 31, 2019.2020.

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 net realizable value using a weighted average cost method. The Company writes down its inventory for estimated obsolescence. The inventory reserve was approximately $61,000$108,000 at December 31, 2019June 30, 2020 compared to $54,000$45,000 at March 31, 2019.2020.

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 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:

ThreeThree Months Ended December 31, 2019June 30, 2020 Compared With ThreThree Months Ende Months Ended December 31, 2018, and Nine Months Ended December 31,ed June 30, 2019 Compared With Nine Months Ended December 31, 2018

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 were relatively flat at $59.9increased by approximately $16.2 million, and $60.1or 20%, to approximately $96.2 million for the quartersquarter ended December 31, 2019 and 2018, respectively. For the nine months ended December 31, 2019, sales decreased byJune 30, 2020, from approximately $9.0 million, or 4.1%, to approximately $209.8 million compared to $218.9$80.0 million for the nine monthsquarter ended December 31, 2018.June 30, 2019. The decreaseincrease in sales for the ninethree months ended December 31, 2019June 30, 2020 was primarily due to decreasedincreased new ordersorder and reorder sales. The Company acquired approximately 76,000186,000 new customers for the quarter ended December 31, 2019,June 30, 2020 compared to approximately 81,000140,000 new customers for the same period the prior year. For the nine monthsquarter ended December 31, 2019 the Company acquired approximately 313,000 new customers, compared to 366,000 new customers for the nine months ended December 31, 2018.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 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 2019,fiscal 2020, the Company’s sales were approximately 31%28%, 25%, 21%, and 23%26%, respectively.

Cost of sales

Cost of sales increased by approximately $1.5$11.3 million, or 3.8%19%, to approximately $42.2$69.4 million for the quarter ended December 31, 2019,June 30, 2020, from approximately $40.7$58.1 million for the quarter ended December 31, 2018. For the nine months ended December 31, 2019,June 30, 2019. The cost of sales increased by approximately $6.0 million, or 4.2%,increase can be directly related to approximately $150.3 million compared to $144.3 million for the same periodincrease in sales during the prior year. Costquarter ended June 30, 2020.As a percentage of sales, as a percentcost of sales was 70.5%72.2% and 67.7%72.7% for the quarters ended December 31,June 30, 2020 and 2019, and 2018, respectively, and for the nine months ended December 31, 2019 and 2018 the cost of sales was 71.6% and 65.9%, respectively. The cost of sales increases and percentage increases can be attributed to price reductions given to customers to stimulate sales in response to increased online competition, and an increase to product costs during the quarter and nine months ended December 31, 2019. One of our long-term strategic initiatives and primary purchasing goals has always been to have direct purchasing relationships with the major manufacturers. We now have direct relationships with all major manufacturers.

Gross profit

Gross profit decreasedincreased by approximately $1.7$4.9 million, or 8.7%23%, to approximately $17.7$26.8 million for the quarter ended December 31, 2019,June 30, 2020, from approximately $19.4$21.9 million for the quarter ended December 31, 2018. For the nine months ended December 31, 2019 gross profit decreased by approximately $15.0 million, or 20%, to approximately $59.6 million, compared to $74.6 million for the same period in the prior year. The decrease in gross profit for the quarter and nine months ended December 31, 2019 is directly related to a decrease in sales and price reductions.June 30, 2019. Gross profit as a percentage of sales was 29.5%27.8% and 32.3%27.3% for the three monthsquarters ended December 31,June 30, 2020 and 2019, and 2018, respectively, and for the nine months ended December 31, 2019 and 2018,respectively. The increase in gross profit was 28.4% and 34.1%, respectively. The gross profit percentage decreases foris directly related to the quarter and nine months ended December 31, 2019 can be mainly attributed to price reductions given to customers to stimulateincrease in sales in response to increased online competition, and an increase to product costs during the quarter and nine months. We now have direct relationships with all major manufacturers and these manufacturers have minimum advertised price policies which should cause a general price discipline in the online market. Over the past three sequential quarters gross margin percentages have increased from 27.3% inended June 2019, to 28.6% in September 2019, and to 29.5% in December 2019.30, 2020.

General and administrative expenses

General and administrative expenses increased by approximately $247,000,$1.2 million, or 4.3%19%, to approximately $6.0$7.8 million for the quarter ended December 31, 2019, compared to $5.8June 30, 2020, from approximately $6.5 million for the quarter ended December 31, 2018.June 30, 2019. The increase in general and administrative expenses for the quarterthree months ended June 30, 2020 was primarily relateddue to the following: a $816,000 increase in payroll expenses of which $430,000 was due to an increase in payroll expensesstock-related compensation expenses; a $319,000 increase in bank service fees; and a $100,000 increase in telephone expenses. Approximately $240,000 of the customer care, pharmacy, and information technology departments. General and administrative expenses as a percentage of sales was 10.1% and 9.6% for the quarters ended December 31, 2019 and 2018, respectively. Generalincrease to general and administrative expenses were relatively flat at approximately $18.9 million for both the nine months ended December 31, 2019 and 2018.  General and administrative expenses as a percentage of sales was 9.0% and 8.7% for the nine months ended December 31, 2019 and 2018, respectively.  The percentage increase for the nine months ended December 31, 2019 was primarily related to decreased sales inCOVID-19, which included payroll and telephone expenses, due to increased hours to meet the nine month period.increased demand and employees working from home.

Advertising expenses

Advertising expenses decreasedincreased by approximately $456,000,$409,000, or 12.6%4.7%, to approximately $3.2$9.0 million for the quarter ended December 31, 2019,June 30, 2020, from approximately $3.6$8.6 million for the quarter ended December 31, 2018. For the nine months ended December 31, 2019,June 30, 2019. The increase in advertising expenses increased by approximately $917,000, or 5.9%, to approximately $16.5 million compared to advertising expenses of approximately $15.6 million for the nine months ended December 31, 2018. The advertising expenditures forquarter was consistent with the three and nine months ended December 31, 2019 were intended to stimulate sales and acquire new customers.Company’s 2021 marketing plan. The advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, decreased to $42was $48 for the quarter ended December 31, 2019June 30, 2020 compared to $45$62 for the quarter ended December 31, 2018. For the nine months ended December 31, 2019 and 2018 the advertising costs of acquiring a new customer were $53 and $43, respectively. The decrease to customer acquisition costs for the quarter ended December 31, 2019 can be attributed to reduced advertising expenses compared to the same quarter in the prior year. The increase to customer acquisition costs for the nine months ended December 31, 2019 can be attributed to increased advertising costs, primarily television advertising, and a lower-than-expected consumer response in the June 2019 and September 2019 quarters, which may be attributed to increased online competition.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 5.3%9.4% and 6.0%10.8% for the quarters ended December 31,June 30, 2020 and 2019, and 2018, respectively, and for the nine months ended December 31, 2019 and 2018 advertising expense was 7.9% and 7.1%, respectively. The decrease in advertising expense as a percentage of total sales for the quarter ended December 31, 2019June 30, 2020 can be attributed to decreased advertising expense in the quarter. The increase in advertising expense as a percentage of total sales for the nine months ended December 31, 2019 can bemainly attributed to increased televisionefficiency of the advertising expense in the June 2019 quarter.to stimulate sales and promote brand awareness. The Company currently anticipates advertising as a percentage of sales to be approximately 8.0%9.0% for fiscal 2020.2021. However, the advertising percentage will fluctuate quarter to quarter due to seasonality and advertising availability.

Depreciation

Depreciation expense was $562,000 and $568,000 for the quarterquarters ended December 31,June 30, 2020 and 2019, increased slightly by approximately $6,000 to $562,000 compared to $556,000 for the quarter ended December 31, 2018. For both of the nine months ended December 31, 2019 and 2018 depreciation expense were approximately $1.7 million. The increasesrespectively. This slight decrease to depreciation expense for the quarter and nine months ended December 31, 2019June 30, 2020 can be attributed to fewer new property and equipment additions.additions during the quarter, compared to previous quarters.

Other income

Other income decreased slightly by approximately $41,000,$479,000, to approximately $722,000$345,000 for the quarter ended December 31, 2019 fromJune 30, 2020 compared to approximately $763,000$824,000 for the quarter ended December 31, 2018. For the nine months ended December 31, 2019 other income increased by approximately $167,000, to approximately $2.3 million compared to approximately $2.1 million for the same period in the prior year.June 30, 2019. The decrease to other income for the quarter ended December 31, 2019 wasJune 30, 2020 is primarily related to decreased interest income due to decreased interest rates compared to the prior year. The increase to other income for the nine months ended December 31, 2019 was primarily related to increased interest income due to higher interest rates in the June and September quarters.rates. Interest income may decrease in the future as the Company utilizes its cash balances on its share repurchase plan, with approximately $28.7 million remaining as of December 31, 2019,June 30, 2020, on any quarterly dividend payment, or on its operating activities, or with further decreases in interest rates.activities.

Provision for income taxes

For the quarters ended December 31,June 30, 2020 and 2019, and 2018, the Company recorded an income tax provision of approximately $1.8$2.0 million and $2.4$1.6 million, respectively, and forrespectively. The increase in the nine months ended December 31, 2019 and 2018, the Company recorded an income tax provision offor the quarter ended June 30, 2020 is related to an increase in operating income during the quarter. The effective tax rate for the quarters ended June 30, 2020 and 2019 were approximately $5.9 million20.6% and $9.4 million,23.5%, respectively. The decrease in the effective tax rate for the quarter ended December 31, 2019 was approximately 21.0% compared to 23.5% for the quarter ended December 31, 2018, and the effective tax rate for the nine months ended December 31, 2019 was approximately 23.9%, compared to 23.2% for the nine months ended December 31, 2018. The decrease to the income tax provision and effective rate for the quarter ended December 31, 2019 was due to a reduction in the Florida state corporate income tax rate, and a one-time income tax benefit of $96,000June 30, 2020 is related to the reconciliationcompany receiving a one-time state income tax refund of $285,000 during the Company’s tax return for the fiscal year ending March 31, 2019.quarter. The increase to theCompany estimates its effective rate will be approximately 23.5% for the nine months ended December 31, 2019 can be attributed to a $322,000 income tax charge related to restricted stock compensation which was recognized in September 2019.fiscal 2021.

Liquidity and Capital Resources

The Company’s working capital at December 31, 2019June 30, 2020 and March 31, 20192020 was $102.0$106.7 million and $107.8$104.7 million, respectively. The $5.8$2.0 million decreaseincrease in working capital was primarily attributable to the share buyback andincome generated by operations, offset by dividends paid in the period, offset byperiod. Net cash flow generated from operations. Netused in operating activities was $11.2 million for the three months ended June 30, 2020, compared to cash provided by operating activities was $21.6 million and $32.0 millionoperations of $36,000 for the ninethree months ended December 31, 2019 and 2018, respectively.June 30, 2019. This change can beis mainly attributed to a decreasean increase in the Company’sinventory, offset by an increase to net income, and increases in account payables and income taxes payable for the nine monthsquarter ended December 31, 2019.June 30, 2020. We have not seen any material disruptions in our supply chain, but as a precaution we temporarily increased our inventory by $25.2 million during the quarter ended June 30, 2020. Net cash used in investing activities increased to $1.8 millionwas $145,000 for the ninethree months ended December 31, 2019,June 30, 2020, compared to net cash$192,000 used in investing activities of $507,000 for the ninethree months ended December 31, 2018. The increaseJune 30, 2019. This change in investing activities relatesis related to increased assetdecreased property and equipment additions duringacquired in the period.quarter. Net cash used in financing activities was $27.9$5.6 million for the nine monthsquarter ended December 31, 2019,June 30, 2020 compared to $16.3$17.0 million for the same period in the prior year.quarter ended June 30, 2019. The increasedecrease 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 quarter30, 2019 and the remaining increase to financing activities related to an increaseno such purchases in the dividend paid in the nine monthsquarter ended December 31, 2019.June 30, 2020.

At December 31, 2019,June 30, 2020, the Company had approximately $28.7 million remaining under the Company’s share repurchase plan. Subsequent to December 31, 2019, on January 21,On July 20, 2020 our Board of Directors declared a quarterly dividend of $0.27$0.28 per share.share dividend. The Board established a February 3,July 31, 2020 record date and a February 14,an 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, 2019,June 30, 2020, the Company had no material outstanding lease commitments. See Note 1, Recent Accounting Pronouncements, to the Condensed Consolidated Financial Statements within this Form 10-Q for the Company’s disclosure related to leases. 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 $3.3$1.5 million forecasted for capital expenditures for the remainder of fiscal 2020,2021, 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, 2019.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 investments.equivalents. At December 31, 2019,June 30, 2020, we had $92.4$86.8 million in cash and cash equivalents, and athe 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 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, 2019,June 30, 2020, we had no debt obligations.

ITEM 4.CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company’s management, including our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended) as of the quarter ended December 31, 2019,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.None.

ITEM 1A.RISK FACTORS.

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations, and trading price of our common stock. Please refer to our Annual Report on Form 10-K for Fiscal Year 2019fiscal 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 2020.fiscal 2021.

Issuer PurchasesPurchases of Equity Securities

None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.       MINE SAFETY DISCLOSURES.

Not 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.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

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

_______________________

PETMED EXPRESS, INC

_______________________

FORM 10-Q

FOR THE QUARTER ENDED:

DECEMBER 31, 2019JUNE 30, 2020

_______________________

EXHIBITS

_______________________