PETMED EXPRESS INC

PetMed Express, Inc., operating as PetMeds and as parent company of PetCareRx, is a nationwide direct-to-consumer pet health and wellness retailer that markets and sells products through its websites, customer contact centers, and mobile applications. The Company provides access to top branded pharmaceuticals, generic medications, compounded prescription medications, over-the-counter health and wellness products, prescription and non-prescription food, pharmacy fulfillment, and personalized AutoShip capabilities for dogs, cats, and horses. Founded in 1996, the Company has fulfilled orders for almost twenty-million pet parents in all 50 states. In April 2023, the Company acquired PetCareRx, an online supplier of pet medications, foods, and supplies, which added a catalog of prescription and non-prescription food and supplies. The Company’s pharmacies are accredited by the National Association of Boards of Pharmacy and LegitScript, and it employs licensed pharmacists and a 50-state licensed Pharmacist-in-Charge for each of its two pharmacy locations. The Company’s product line includes approximately 6,400 SKUs, and a significant portion of sales is attributable to products representing approximately 100 SKUs, including the most popular flea and tick, and heartworm preventative brands.

For the fiscal year ended March 31, 2026, the Company reported total net sales of approximately $179.0 million ¹, a decrease of approximately 21.1% compared to approximately $227.0 million for the prior fiscal year ². The Company reported a net loss of approximately $57.3 million for fiscal 2026 ³, compared to a net loss of approximately $6.3 million for fiscal 2025 ⁴. The increase in net loss was primarily driven by a goodwill impairment charge of $26.7 million recorded in the first quarter of fiscal 2026 ⁵, as well as a decline in prescription medication sales. The Company attracted approximately 266,000 new customers in fiscal 2026 ⁶, compared to approximately 351,000 new customers in fiscal 2025 ⁷. The average order value was approximately $98 for fiscal 2026 ⁸ and $97 for fiscal 2025 ⁹.

The Company’s sales are generated through three primary distribution channels: e-commerce websites, a customer contact center, and the PetAssure broker network. Recurring sales, which includes AutoShip and membership revenue, as a percentage of total gross sales was 62.6% for the most recent quarter ended March 31, 2026 ¹⁰, up from 56.1% for the same period last year ¹¹. The Company’s AutoShip program is a key component of its strategy, and approximately 62.6% of sales were generated via the AutoShip and membership program in the fourth quarter ended March 31, 2026 ¹². The Company also offers membership programs through PetPlus, which includes discounts for more than 700,000 partners, a special discount for pet sitting services, the ability to pick up prescriptions from a local pharmacy, and free 24/7 virtual vet support and delivery services.

The Company’s pharmaceutical operations are conducted at its facilities in Lynbrook, New York, and Delray Beach, Florida. The Company maintains pharmacy licensure in all 50 U.S. states. The Company’s inventory sourcing is concentrated, with approximately 88% of inventory spend in fiscal 2026 concentrated among ten primary suppliers ¹³. The Company has direct purchasing relationships with major pet medication manufacturers and distributors. As of March 31, 2026, the Company had 189 full-time employees ¹⁴, none of whom are represented by a labor union. The Company’s principal executive offices and distribution center are located at 420 South Congress Avenue, Delray Beach, Florida, which consists of approximately 557,000 square feet of land with two building complexes totaling approximately 185,000 square feet.

The Company identified material weaknesses in its internal control over financial reporting for the periods ended March 31, 2024, 2025, and 2026. Management concluded that disclosure controls and procedures were not effective as of the end of the period covered by this Annual Report on Form 10-K. The Company also reported that it had restated its previously issued audited consolidated financial statements as previously reported in its Annual Report on Form 10-K for the year ended March 31, 2025. The Company’s liquidity position has been impacted by declining cash balances, declining net sales, recurring operating losses, and negative operating cash flows, which raised substantial doubt about the Company’s ability to continue as a going concern, though management has concluded that its plans alleviate this doubt.

Management’s forward-looking strategy is centered on transitioning from a traditional e-commerce provider to a best-in-class pharmacy provider, supported by a scalable, technology-driven infrastructure. The Company is prioritizing investments in the modernization of its technology stack, specifically its e-commerce architecture and cloud environments, to enhance operational agility and improve the customer experience. Central to this evolution is an emphasis on clinical compliance, with expanded educational initiatives to drive customer adherence for critical preventative medications, such as flea, tick, and heartworm treatments, promoted through the AutoShip program. The Company is also diversifying its revenue streams by offering its proprietary pharmacy fulfillment and licensing capabilities to strategic partners who lack the regulatory infrastructure to serve the pet health market directly. Concurrently, the Company intends to partner with veterinarians and clinics to provide integrated pharmacy fulfillment services.

The Company’s strategy focuses on deepening customer trust and expanding its market footprint through three key pillars: loyalty and retention through a comprehensive loyalty program designed to provide enhanced incentives and exclusive value to customers; strategic B2B partnerships that leverage existing infrastructure to provide end-to-end pharmacy fulfillment; and improved content and education to highlight the critical importance of pet medication compliance. The Company plans to leverage its 30 years of pet profile data to continue to personalize the customer experience online and through its mobile apps. The Company believes these purposeful investments in the foundation of its core business as a pharmacy will drive sustainable competitive advantages and long-term shareholder value.

For fiscal 2026 and 2027, the Company has transitioned to a unified marketing and merchandising organizational structure, integrating its buying, merchandising, and marketing functions into a single cohesive unit. The Company has focused its marketing investments on the channels that drive the highest ROI, shifting dollars away from top of funnel spend and reallocating towards mid-to-lower funnel activities. A primary pillar of the strategy is the enhancement of customer retention and lifetime value through more personalized and targeted email marketing and the future launch of a robust loyalty program. The Company also aims to expand its AutoShip program through enhanced incentives to encourage prescription compliance.

The Company is prioritizing maximizing customer LTV and improving NSPAC by deploying cross-selling and upselling initiatives throughout the customer journey. By leveraging personalized data insights to pair preventative medications with complementary health products, the Company aims to increase basket size and capture a greater share of total pet wellness spend. The Company believes this integrated approach targeting cats, dogs, and horses across all life stages will improve conversion rates, strengthen brand equity, and drive sustainable incremental revenue. The Company aims to create a best-in-class marketing operation through a continuous test-and-learn approach as it progresses into fiscal 2027.

During the first quarter of fiscal 2027, the Company has implemented certain modules of a new ERP system and will continue to implement other components of the new system, which has replaced, and will continue to replace, legacy operating and financial systems. A key priority for fiscal 2027 is modernizing customer engagement capabilities, including expanding and automating call center solutions to unify interactions across phone, chat, and digital channels. The Company is also investing in its loyalty and membership programs to strengthen customer engagement, increase retention, and drive repeat purchases. The Company is expanding its platform to support white-label solutions and pharmacy-as-a-service offerings, enabling partners to leverage its pharmacy infrastructure, fulfillment, and digital experience as part of their B2B growth strategy.

The Company’s plan to alleviate substantial doubt about its ability to continue as a going concern includes advertising and media spend optimization, strategic reductions in operating expenses, including decreases in professional fees following the resolution of non-recurring matters, and reductions in capital expenditures. Management determined that these plans are probable of being effectively implemented and are probable of mitigating the conditions that raised substantial doubt. The Company does not expect to incur additional material costs related to the previously disclosed investigation.

The Company faces significant regulatory risks, as any failure to comply with various state or federal regulations covering its pet health business, including the dispensing of prescription pet medications, may subject it to reprimands, sanctions, probations, fines, suspensions, or the loss of one or more of its pharmacy licenses. The Company’s current home-state license with the Florida Board of Pharmacy is valid until February 28, 2027, and PetCareRx’s home-state license in the State of New York is valid until April 30, 2028, with no guarantee of renewal. The Company’s financial condition has raised substantial doubt as to its ability to continue as a going concern, impacted by declining cash balances, declining net sales, recurring operating losses, and negative operating cash flows. The Company faces significant competition from veterinarians and online and traditional retailers, and several large retailers have recently announced entrance into the pet pharmacy space. The Company’s inventory is concentrated, with approximately 88% of inventory spend in fiscal 2026 concentrated among ten primary suppliers ¹⁵, and the loss of any key supplier would negatively impact the business. The Company has identified material weaknesses in its internal control over financial reporting for the periods ended March 31, 2024, 2025, and 2026, and management has determined that its disclosure controls and procedures were not effective as of the end of the period covered by this Annual Report on Form 10-K. The Company is also subject to risks related to product recalls, cybersecurity incidents, and evolving foreign trade policy, including tariffs, which could affect the cost or availability of products.

Management’s message to shareholders emphasizes the Company’s role as a pioneer in pet healthcare, building a consumer-first digital platform in 1996 that transformed the way customers fulfill pet medications. Management highlights the Company’s commitment to its mission and purpose, noting that since its founding, it has fulfilled orders for almost twenty-million pet parents in all 50 states. The forward-looking strategy is centered on transitioning from a traditional e-commerce provider to a best-in-class pharmacy provider, supported by a scalable, technology-driven infrastructure. The two or three strategic priorities emphasized include: deepening customer trust and expanding market footprint through loyalty and retention, strategic B2B partnerships, and improved content and education; prioritizing investments in the modernization of the technology stack; and diversifying revenue streams by offering proprietary pharmacy fulfillment and licensing capabilities to strategic partners. Management also notes that the Company is redefining the customer journey by leveraging modern technology and artificial intelligence to personalize the customer experience.