PETMED EXPRESS INC

Evaluation of Disclosure Controls and Procedures

Management maintains a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow for timely decisions regarding required disclosure.

An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2025, the end of the period covered by this report (the “Evaluation Date”) was performed under the supervision and with participation of management, including our Interim Chief Executive Officer and Interim Principal Financial Officer. Based upon that evaluation, our Interim Chief Executive Officer and Interim Principal Financial Officer concluded as of the Evaluation Date, that our disclosure controls and procedures were not effective as of March 31, 2025, due to the material weaknesses in internal control over financial reporting described below.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Interim Chief Executive Officer and Interim Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2025 based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework, management concluded that our internal control over financial reporting was not effective, as of March 31, 2025, as a result of the material weaknesses described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

As previously reported in our Form 10-K filed on June 14, 2024 the following material weaknesses continued to exist as of March 31, 2025:

•Information Technology General Controls (“ITGCs”) – A material weakness in internal controls relating to our ITGCs in the areas of user access, change management and service organizations over information technology (“IT”) systems that support the Company’s financial reporting processes. We concluded this ITGC material weakness may impact revenue and other business process controls and automated controls reliant upon these ITGCs. We believe that this material weakness was partially the result of lack of documentation created and retained to evidence management's procedures in addition to new in-scope systems related to the PCRX acquisition. While our ITGCs have substantially improved since fiscal year 2024, these control deficiencies continued to exist and result in an overall material weakness as of March 31, 2025.

•Income and Sales Taxes – During fiscal 2024, errors were identified in (1) the appropriate application of US GAAP relating to our sales tax liability and (2) the misapplication of Internal Revenue Code 162(m) which limits the deductibility of executive compensation in our consolidated financial statements. Additionally, in fiscal 2025 errors were identified in the calculation of our income tax provision, specifically related to our management review control over the income tax provision. While Management has made significant progress in remediating the sales tax deficiency, by hiring a third-party tax specialist with the requisite knowledge and resources and implementing a new control over the calculation of sales taxes, the material weakness will not be considered remediated until the implemented controls operate for a sufficient period of time and Management has concluded, through testing, that the related controls are effective. Consequently, Management has determined that this material weakness continues to exist as of March 31, 2025. We will continue to monitor the effectiveness of our remediation plan and refine the remediation plan as appropriate.

•Complex Accounting Matters – During fiscal 2024, Management identified a material error in the PetCareRx purchase accounting related to the valuation of deferred tax assets and goodwill, which resulted in the restatement of our unaudited condensed consolidated financial statements included in our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2023 and September 30, 2023. Additionally, during fiscal 2025, a deficiency was identified in the operating effectiveness of controls over management’s identification of triggering events and evaluation of impairment related to long-lived assets. Management has determined that this material weakness continues to exist as of March 31, 2025.

As described elsewhere in this Form 10-K, the Audit Committee engaged external legal counsel with other external advisors to investigate reports filed through the Company’s third-party-administered whistleblower hotline regarding: the timing of revenue recognition with respect to certain AutoShip orders in the fiscal fourth quarter of 2025, some of which resulted in customer complaints; a fiscal fourth quarter 2025 $50 coupon promotion to customers and its potential impact on Company key-performance indicators (“KPIs”) regarding new customers; and the Company’s culture and control environment (the “Investigation”).

In connection with the preparation of our Annual Report on Form 10-K for the year ended March 31, 2025 and the completed Investigation, we identified additional material weaknesses in our internal control over financial reporting. Specifically, the Company did not have an effective control environment, risk assessment process, information and communication process and monitoring activities. The aggregation of issues identified within each of these areas resulted in the conclusion that a material weakness existed with respect to the “tone at the top” and effectiveness of governance within the Company:

•The Company failed to establish a tone at the top that fostered a culture of commitment to the principles set forth in the Company’s Code of Business Conduct and Ethics.

•The Company did not have effective information communication and monitoring controls, including a robust whistleblower process, relating to the timely identification and communication of issues among financial reporting personnel, management, the Board, and the independent registered public accounting firm to enable appropriate analysis, financial reporting, and disclosure of such transactions.

•The Company lacked effective controls and procedures that facilitated effective internal communication of alleged violations of the Code of Conduct.

•The Company lacked an effective and continuous risk assessment process and related controls to properly monitor, identify and analyze risks, including related risks of financial misstatement due to error and / or fraud, including management override of controls.

•The Company lacked effective controls and procedures regarding the update of key accounting policies.

•The former Audit Committee chair did not promptly report whistleblower complaints to the Company’s external auditors, RSM US LLP.

This tone at the top material weakness contributed to an additional material weakness related to the following:

•Management determined that certain the control activities within the revenue recognition business process, resulting in certain AutoShip revenue being recorded prior to the time at which all of the revenue recognition criteria were met. As a result of the material weakness, material errors were identified and corrected in the Company’s financial statements that had initially been provided to the Company’s independent auditors, RSM US LLP. These corrections were made prior to the issuance of the audited financials for the year ended March 31, 2025.

•Management determined that it did not design and maintain effective controls over the complete, accurate and timely recording of cooperative advertising and vendor reimbursements due to: (1) the misapplication of the accounting guidance in ASC 705, Accounting for Consideration Received from Vendors; (2) a lack of review of certain provisions in vendor contracts and (3) lack of communicating and sharing information between the sales, accounting and finance departments. As a result of the material weakness, the material errors were identified and corrected in the Company’s financial statements that had initially been provided to the Company’s independent auditors, RSM. These corrections were made prior to the issuance of the audited financials for the year ending March 31, 2025. Additionally, the Company determined that the consolidated financial statements for the years ended March 31, 2024, and 2023; as well as, the interim periods within fiscal years ended March 31, 2025, 2024, and 2023, should be restated.

Remediation Plan – ITGC Material Weakness

The Company is committed to remediating the ITGC material weakness identified above, fostering continuous improvement in internal controls and enhancing its overall internal control environment. Since identifying the above material weakness, the Company has begun the process of implementing the remediation activities described below. We have put forth significant resources and effort to remediate our material weakness relating to ITGCs and our ITGCs have substantially improved since 2024. Our efforts to remediate our ITGC material weakness include:

•Continuing to utilize third-party consultants specialized in ITGCs, internal audit, risk management and compliance functions. Their expertise will help us to continually assess risk and design and implement appropriate controls to address said risks.

•Continuing to implement ITGCs to address new risks and enhance the design of ITGCs to address changing risks.

•Providing additional training for control owners and reviewers with specific focus on understanding the risks being addressed by the controls they are performing, as well as requirements for sufficient documentation and evidence in the execution of the controls.

•Continuing to analyze controls and policies as we upgrade our environment and systems in the upcoming year.

•Continuing to enhance our reporting process related to the remediation measures to the Audit Committee.

The material weakness around ITGCs described herein will not be remediated until our remediation plan has been fully developed and implemented, the applicable controls operate for a sufficient period of time, and we have concluded, through testing, that the newly implemented and enhanced controls are designed and operating effectively. We may conclude that additional measures, including resources, are necessary to remediate the material weakness in our internal control over financial reporting, which may necessitate additional evaluation and implementation time. We may also modify certain of the remediation efforts described above.

Remediation Plan – Income and Sales Taxes

The following actions and plans will be or have been implemented during fiscal 2025 and fiscal 2026:

•In fiscal 2025, Management hired a third-party tax specialist to assist in income and sales tax related matters.

•Management will enhance the oversight and review of tax-related accounting estimates and calculations to ensure they are complete and accurate.

•The Company will provide additional training to personnel involved in tax accounting and financial reporting to enhance their understanding of the relevant accounting standards and requirements.

•The Company will enhance and retain the documentation of tax positions and related accounting judgments to ensure they are adequately supported and can withstand external scrutiny.

Remediation Plan – Complex Accounting Matters

The following actions and plans will be or have been implemented during fiscal 2025 and fiscal 2026:

•Management will enhance its policy, procedures and process level controls on how it gathers and analyzes relevant facts and circumstances in connection with all complex business transactions.

•The Company will engage a third-party specialist to assist with accounting for complex accounting matters.

•The Company will provide additional training to personnel involved in accounting for complex accounting matters and financial reporting to enhance their understanding of the relevant accounting standards and requirements.

Remediation Plan – Tone at the Top

On July 24, 2025, the Chair of our Audit Committee, Diana Purcel resigned from the Board.

•On August 11, 2025, The Board appointed Leslie C.G. Campbell to serve as our interim Chief Executive Officer following the resignation of the Company’s CEO, Sandra Campos.

•On August 11, 2025, The Board appointed Douglas Krulik as the Company’s interim Principal Financial Officer, reporting to the Company’s interim Chief Executive Officer and the Audit Committee of the Board following the resignation of the Company’s CFO, Robyn D’Elia.

•On August 11, 2025, Peter Batushansky was appointed Chair of the Board’s Audit Committee, succeeding Ms. Campbell who served as Chair of the Audit Committee from July 24 until August 11, 2025. Leah Solivan was appointed to Chair of the Board’s Compensation and Human Capital Committee. The Company reconstituted the membership of its Board committees and the Board reduced the number of directors on the Board to five members until such time as the Board determines to appoint or nominate additional directors.

•The Company will update its Code of Conduct to establish formalized protocols for situations where one senior executive makes allegations against another. Additionally, the Company will implement a quarterly recertification process and enhance employee training focused on ethical values, compliance with applicable laws, regulations, and Company policies—including the Code of Conduct—and will emphasize the importance of accurate and transparent financial reporting.

•Under the supervision of the Board, the Company will emphasize to key leadership the importance of setting appropriate tone at the top and of appropriate behavior with respect to accurate financial reporting, compliance with laws, and adherence to the Company’s internal control over financial reporting framework and accounting policies.

Remediation Plan –Revenue Recognition

•The Company will implement a more robust risk assessment process focused on identifying and analyzing risks of financial misstatement due to error and/or fraud, including management override of controls. On an annual basis (or more frequently, should a significant triggering event occur), the Company will update its risk assessment to ensure that the scope of its Sarbanes-Oxley compliance program adequately reflects changes to the business and its operations.

•The Company will update its key policies and procedures to ensure the proper processing of transactions with senior executives, and to enhance the review and approval for these types of transactions and ensure their proper disclosure and will train relevant employees on such updated policies.

•The Company will conduct internal training courses over Sarbanes-Oxley regulations and the Company’s internal control over financial reporting program for Company personnel involved in the execution of the program.

•We will engage third-party experts, as necessary, to assist our management with the review of the accounting treatment and the financial reporting and disclosure of significant, complex or non-recurring transactions.

•Prior to the filing of this Form 10-K, the Company established a Disclosure Committee comprised of senior management representatives from all relevant departments within the organization. Members of this committee are responsible for reviewing all quarterly and annual SEC filings, and meet prior to each filing to discuss the completeness and accuracy of the document being filed.

•The Company is designing and implementing a variety of new procedures, such as enhancing its weekly business review meetings amongst senior management that are attended by members of the accounting department and Board, to ensure that cross-functional senior management is aware of operational changes that may affect the Company.

•The Company will design and implement additional controls over revenue recognition, specifically relating to its AutoShip program.

Remediation Plan – Cooperative Advertising and Vendor Reimbursements

•Management will enhance its policy, procedures and process level controls on how it gathers and analyzes relevant facts and circumstances in connection with cooperative advertising and vendor contracts.

•The Company will provide additional training to personnel involved in accounting for cooperative advertising and vendor reimbursements and financial reporting to enhance their understanding of the relevant accounting standards and requirements.

Changes in Internal Control over Financial Reporting

Other than as described above, there were no changes in our internal control over financial reporting during the fourth quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design and disclosure controls and procedures must reflect the fact that there are resource constraints, and that Management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their cost.