PETMED EXPRESS INC

(1) Description of Business and Summary of Significant Accounting Policies

Organization

Founded in 1996, PetMed Express, Inc. and subsidiaries, d/b/a PetMeds® and PetCareRx,Inc. d/b/a PetCareRx® (collectively, the "Company", "we", "us", or "our") is a leading nationwide direct-to-consumer pet pharmacy and online provider of prescription and non-prescription medications, food, supplements, supplies and partner with providers to offer various vet services for dogs, cats, and horses. The Company markets and sells directly to consumers through its websites, customer contact center, and mobile application. The Company offers consumers an attractive alternative for obtaining pet medications, foods, and supplies in terms of convenience, price, speed of delivery, and valued customer service.

The Company has a March 31 fiscal year and references herein to fiscal 2026, 2025, or 2024 refer to the Company's fiscal years ended March 31, 2026, 2025, and 2024, respectively.

Principles of Consolidation

The Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America "U.S. GAAP" and the rules and regulations of the SEC and include PetMed Express, Inc. and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Business Combinations

The Company accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. The purchase price is allocated to the fair value of the assets acquired and liabilities assumed. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date. The excess of the purchase price of acquisition over the fair value of the identifiable net assets of the acquiree is allocated to goodwill. The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition.

Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates and selection of comparable companies. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions, and competition. In connection with the determination of fair values, the Company may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets acquired and certain obligations assumed. Acquisition-related transaction costs incurred by the Company are not included as a component of consideration transferred but are accounted for as an operating expense in the period in which the costs are incurred.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturity of three months or less to be cash equivalents. Cash and cash equivalents at March 31, 2026 and 2025 consisted of the Company’s cash accounts and money market funds with a maturity of three months or less, and are carried at cost, which approximates fair value. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

Liquidity

Management evaluates the Company’s ability to continue as a going concern in accordance with ASC Subtopic 205-40, Presentation of Financial Statements - Going Concern. This assessment considers whether conditions or events raise substantial doubt about the Company’s ability to meet its obligations as they become due within one year of the date these consolidated financial statements are issued.

For the year ended March 31, 2026, management’s assessment identified certain conditions and events that, when considered in the aggregate, raised substantial doubt about the Company’s ability to continue as a going concern. These included, among other things;

•declining cash and cash equivalent balances from $54.7 million as of March 31, 2025 to $21.4 million as of March 31, 2026,

•declining net sales by approximately 21.1% or $48.0 million, for the year ended March 31, 2026 compared to the year ended March 31, 2025,

•advertising costs of acquiring a new customer, defined as total advertising costs divided by new customers acquired, increased for the year ended March 31, 2026 compared to the year ended March 31, 2025,

•negative operating cash flows for the year ended March 31, 2026, and

•ongoing operating losses.

Management’s assessment also considered the impact of increased competition in the e-commerce pet pharmacy market, operational complexities and the Company’s dependence on the successful execution of strategic cost reductions. Management evaluated the significance of these conditions in relation to the Company’s ability to meet its obligations during the assessment period. In response to these conditions, management has developed a plan intended to alleviate substantial doubt. The primary elements of management’s plan include, among other things;

•advertising and media spend optimization, including the elimination of unproductive media spend and overall reductions in marketing costs,

•strategic reductions in operating expenses, including decreases in professional fees following the resolution of non-recurring matters, and

•reductions in capital expenditures as significant technology initiatives were completed during the year ended March 31, 2026.

Management determined that these plans are probable of being effectively implemented and are probable of mitigating the conditions that raised substantial doubt. As of the issuance of these financials, management has concluded that substantial doubt about the Company’s ability to continue as a going concern for the next twelve months is alleviated by these plans. Accordingly, the accompanying consolidated financial statements have been prepared on a going concern basis of accounting.

Use of Estimates

The preparation of Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. Key estimates are used for, but not limited to, commitments and contingencies, sales tax liabilities, income taxes, inventory valuation, stock-based compensation, supplier rebates and valuation of goodwill and intangibles.

Inventories

Inventories represent finished goods and 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. Our reserve for inventory obsolescence is primarily estimated based upon the inventory’s remaining shelf-life and our anticipated ability to sell such inventory, which is estimated using past experience within its remaining shelf life. The inventory reserve was approximately $207 thousand and $34 thousand at March 31, 2026 and 2025, respectively.

During the year ended March 31, 2026, the Company recorded an inventory write-down of $2.1 million related to certain inventory originally acquired for a wholesale distribution transaction that did not materialize. The write-down was recorded as a component of cost of goods sold within income from continuing operations. The resulting inventory balance reflects management’s best estimate of expected recoverability as of the balance sheet date.

Property and Equipment

Property and equipment are stated at cost, net of accumulated amortization. Depreciated is calculated using the straight-line method over the estimated useful lives of the assets. Our building is being depreciated over a period ofthirty years. The furniture, fixtures, equipment, and computer software are being depreciated over periods ranging from three toten years.

We incur software development costs related to internal-use software and our websites. Internal-use software includes labor and license costs associated with software development for internal use and is amortized using the straight-line method over the estimated useful life of the software.

Long-lived Assets

Long-lived assets, primarily includes fixed assets, definite lived intangibles, right-of-use assets, and other assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset group to the undiscounted cash flows expected to be generated by the asset group from its use and eventual disposition of that asset group. Assets are considered to be impaired if the carrying amount of an asset group exceeds the future undiscounted cash flows. If impairment is determined to exist, any related impairment loss is calculated based on estimated fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less cost of disposal. The Company determined that all of its long-lived assets are part of a single entity-wide asset group for the purpose of long-lived asset impairment assessment.

During the first and fourth quarters of fiscal 2026, the Company identified impairment indicators requiring an impairment analysis of the Company's long-lived asset group. These triggering events included a downward revision to the Company's forecast and a decrease in the Company's market capitalization which fell below the Company's carrying value for a sustain period beginning in the forth quarter of fiscal 2025. Accordingly, the Company performed a recoverability test of long-lived assets as of June 30, 2025 and March 31, 2026, using estimated undiscounted cash flow projections expected to be generated over the remaining useful life of the primary asset of the asset group at the lowest level with identifiable cash flows that are independent of other assets. Based on the recoverability tests performed, we determined that long-lived assets, were recoverable and, as such, no impairment charges were recorded as of June 30, 2025 and March 31, 2026.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. The Company is required to assess goodwill for impairment annually, or more frequently if circumstances indicate impairment may have occurred. The Company performs its annual impairment assessment in the fourth fiscal quarter of each year. An impairment test of goodwill consists of comparing the carrying amount of the single reporting unit to the fair value of the unit. An impairment loss is recognized by the amount that the carrying amount exceeds the fair value, limited to the amount of goodwill. The Company has concluded that it hasone reporting unit and has assigned the entire balance of goodwill to this reporting unit.

During the first quarter of fiscal 2026, the Company identified potential impairment triggering events indicating that the fair value of its reporting unit was more likely than not less than its carrying value as of June 30, 2025. These triggering events included a downward revision to the Company’s forecast due to continued revenue declines and a decrease in the Company’s stock price and market capitalization that was sustained in the first quarter of fiscal 2026. In accordance with ASC 350, Intangibles - Goodwill and Other, the Company performed a quantitative goodwill impairment test as of June 30, 2025.

The fair value of the single reporting unit was estimated using an income approach, employing a discounted cash flow model. As part of the discounted cash flow model, the Company developed estimates, assumptions and judgments about future results. The discounted cash flow projections were based on estimates made by management of current and future strategic and operational plans and future financial performance. Valuation assumptions used in the Company's discounted cash flow valuation also include projected capital expenditures, earnings before interest expense, income taxes, depreciation and amortization expense (EBITDA), depreciation expense, working capital, discount rates, tax rates and terminal growth rates. The Company applied a terminal growth rate of 3%, income tax rate of 25.3% and discount rate of 14.0% based on a weighted average cost of capital adjusted for the relevant risk associated with the characteristics of the single reporting unit. The Company perform sensitivity analyses around the assumptions in order to assess the reasonableness of the assumptions and the results of the testing. As a result of this impairment test, the Company determined the carrying value of the reporting unit exceeded its fair value, resulting in agoodwill impairment charge of $26.7 million during the three months ended June 30, 2025, which represented the entirety of the goodwill balance previously recorded. There was no tax impact to the impairment as goodwill is not tax deductible. No impairment losses were recognized for the years ended March 31, 2025 and 2024 related to goodwill.

In accordance with ASC 820, Fair Value Measurement, the fair value measurement, on a non-recurring basis, for the goodwill impairment is categorized as a Level 3 fair value measurement. This is due to the significant unobservable inputs used in the valuation, including the forecasted revenues, discount rate, and terminal growth rate, which require significant management judgment and estimation.

Intangible Assets

The Company acquired definite-lived intangible assets in the acquisition of PetCareRx (“PCRx”), that are being amortized based on their estimated useful lives in accordance with ASC Topic 350, Intangibles - Goodwill and Other. These definite-lived intangible assets are being amortized over periods ranging from three toseven years. Acquired trade name is not being amortized and is subject to a review for impairment on an annual basis, or more frequently if circumstances indicate an impairment may have occurred. If the carrying amount of an indefinite lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Following the Company's annual impairment test in fiscal 2025, the Company performed a quantitative assessment and determined that the PCRx trade name was impaired. Based on such impairment test, the Company recognized anon-cash impairment charge of $1.2 million.

During the first quarter of fiscal 2026, the Company identified interim impairment indicators, and as such performed a quantitative interim impairment test as of June 30, 2025, which resulted in additional impairment related to the PCRx trade name of $0.6 million, due to a reduction in actual and forecasted revenues. There were no other impairment charges related to intangible assets recognized for the year ended March 31, 2026.

The fair value of the trade name was determined using the "relief from royalty" method. This method estimates the value of the trade name by calculating the present value of the royalty payments that would have been avoided by owning the trade name rather than licensing it. Key assumptions used in the valuation at June 30, 2025 include:

•Royalty Rate: A hypothetical royalty rate of 0.5% was applied, based on comparable market transactions and industry benchmarks for similar trade names. This rate reflects the estimated arm's-length royalty that a market participant would be willing to pay for the use of the trade name.

•Forecasted Revenues: Future revenue projections associated with the use of the trade name were based on the Company's internal forecasts, incorporating expectations for market growth. These forecasts were adjusted to reflect the impact of the identified triggering event.

•Discount Rate: A discount rate of 14.0% was utilized, representing the Company's weighted average cost of capital (WACC) adjusted for the specific risks associated with the trade name and the relevant industry.

•Capitalization Rate: A capitalization growth rate of 11.0% was applied to project cash flows beyond the discrete forecast period, reflecting long-term sustainable growth expectations.

In accordance with ASC 820, Fair Value Measurement, the fair value measurement, on a non-recurring basis, for the trade name impairment is categorized as a Level 3 fair value measurement. This is due to the significant unobservable inputs used in the relief from royalty valuation, including the royalty rate, forecasted revenues, discount rate, and terminal growth rate, which require significant management judgment and estimation.

Other Assets

Other assets consist of the initial minority interest investment in Vetster. For additional information see Note 6, "Intangible and Other Assets, Net."

Fair Value of Financial Instruments

The carrying amounts of the Company's cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments.

Advertising

The Company's advertising expense consists primarily of Internet marketing and direct mail/print. 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.

Cost of Goods Sold

Cost of goods sold includes the purchase price of inventory sold, freight costs associated with inventory, shipping supply costs, inventory shrinkage costs and valuation adjustments and reductions for promotions and discounts offered by the Company's vendors.

Vendor Allowances

The Company receives funds from its merchandise vendors through a variety of programs and arrangements, primarily in the form of purchases-based or sales-based volumes and for product advertising and placement. The Company recognizes vendor allowances based on purchases and sales as a reduction of cost of sales when the associated inventory is sold. Vendor allowances for advertising and placement are recognized as a reduction of cost of sales ratably over the corresponding performance period. Funds that are determined to be a reimbursement of specific, incremental and identifiable costs incurred to sell vendors’ products are recorded as an offset to the related expense within Advertising Expenses on our Consolidated Statements of Operations when incurred.

Leases

The Company accounts for leases in accordance with ASC Topic 842, Leases. The Company reviews all contracts and determines if the arrangement is or contains a lease, at inception. Operating leases are reported as right-of-use (“ROU”) assets, current lease liabilities and long-term lease liabilities on the Consolidated Balance Sheets. The Company does not have any material leases, individually or in the aggregate, classified as a finance lease.

Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. The operating lease ROU asset also includes any upfront lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with a term of 12 months or less are not recorded on the balance sheet. The Company’s lease agreements do not contain any residual value guarantees.

Approximately 39% of the Company's Delray Beach property, or approximately 72,000 square feet was leased totwo tenants. At March 31, 2026, the leases with thesetwo tenants had a remaining weighted average lease term of 4.3 years. The Company recorded approximately $0.8 million, $0.7 million, and $1.2 million in rental revenue in fiscal 2026, 2025 and 2024, respectively, which was included in other income. In fiscal 2025, the Company recorded $42 thousand of rental revenue associated with a PetCareRx lease which expired in April 2024. The Company expects to receive the following future lease payments, under the current lease agreements, over the next five years: $1.0 million in fiscal 2027, $1.0 million in fiscal 2028, $0.9 million in fiscal 2029, $1.0 million in fiscal 2030 and $0.4 million in fiscal 2031.

Comprehensive Income

The Company applies ASC Topic 220, Reporting Comprehensive Income, which requires that all items that are recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The items of other comprehensive income that are typically required to be displayed are foreign currency items, minimum pension liability adjustments, and unrealized gains and losses on certain investments in debt and equity securities. For the fiscal years ended March 31, 2026, 2025 and 2024, the Company had no components of comprehensive income and therefore does not report comprehensive income or Consolidated Statements of Comprehensive Income.

Income Taxes

The Company accounts for income taxes under the provisions of ASC Topic 740, Accounting for Income Taxes, which generally requires the recognition of deferred tax assets and liabilities for the expected future tax benefits or consequences of events that have been included in the 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. As required by “Accounting for Uncertainty in Income Taxes” guidance, which clarifies ASC Topic 740, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the Consolidated Financial Statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

The Company applies “Accounting for Uncertainty in Income Taxes” guidance to all tax positions for which the statute of limitations remains open. The Company hadno liabilities for uncertain tax positions for either fiscal 2026 or fiscal 2025. The Company files tax returns in the U.S. federal jurisdiction and Florida, Arizona, California, Connecticut, Idaho, Maryland, Michigan, Oklahoma, South Carolina, Virginia, Wisconsin, New Jersey, Georgia, Indiana, New York and the District of Columbia. With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years ending March 31, 2022, or earlier. Any interest and penalties related to income taxes will be recorded to other income (expenses).

Business Concentrations

The Company purchases its products from a variety of sources, including certain manufacturers, domestic distributors, and wholesalers. We have multiple suppliers for each of our product lines to obtain the lowest cost. There were ten and six suppliers, respectively, that each accounted for 2% or more of our total purchase volume; these suppliers represented approximately 89% and 81% of total purchases for fiscal 2026 and 2025, respectively.

Accounting for Share Based Compensation

The Company records compensation expense associated with restricted stock in accordance with ASC Topic 718, Share Based Payments. The compensation expense related to all of the Company’s stock-based compensation arrangements is recorded as a component of general and administrative expenses.

Recent Accounting Pronouncements

Recently Adopted Accounting Standard

In December 2023, the Financial Accounting Standards Board ("FASB") issued Update 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This Update applies to all entities that are subject to Topic 740. The amendments in this Update revise income tax disclosures primarily related to the rate reconciliation and income taxes paid information as well as the effectiveness of certain other income tax disclosures. The Update is effective for annual periods beginning after December 15, 2024. As of March 31, 2026, the Company has adopted ASU 2023-09 prospectively and has enhanced its income tax disclosures included herein, to comply with the requirements. The adoption did not have an impact on the Company’s financial statements.

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The FASB issued this ASU to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. This update became effective with the Company’s fiscal year 2025 annual reporting period and with the Company’s fiscal year 2026 interim reporting periods. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements and resulted in additional segment disclosures within Note 3, “Segment Reporting.”

Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) to require public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, and may be applied on a retrospective or prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of adopting this Update.

In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”) to simplify the estimation of credit losses on current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. The amendments allow all entities to elect a practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on these assets. This ASU is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those fiscal years. Early adoption is permitted. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. The Company is currently evaluating the impact of adopting this Update.

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”) to modernize the accounting for internal-use software costs, primarily by simplifying the requirements to capitalize software development costs. This ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years and may be applied using a prospective, retrospective or modified transition approach. Early adoption is permitted. The Company is currently evaluating the impact of adopting this Update.

In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements(“ASU 2025-11”) to improve the guidance in Topic 270, Interim Reporting by improving navigability of the required interim disclosures, clarifying when that guidance is applicable. The amendments also provide additional guidance on what disclosures should be provided in interim reporting periods. The guidance is effective for interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of adopting this Update.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements(“ASU 2025-12”), to address suggestions received from stakeholders on the Accounting Standards Codification and to make other incremental improvements to GAAP. The update represents changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. The amendments make the Codification easier to understand and apply. The guidance is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting this Update.

The Company does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, will have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.

(2) Revenue Recognition

In accordance with ASC Topic 606, Revenue from Contracts with Customers, the Company primarily generates revenue by selling prescription and non-prescription pet medication products, pet food, supplements, supplies, membership fees, and veterinary services. Certain pet supplies offered on the Company’s websites are drop shipped to customers. We are the principal in the arrangement, as we control the goods prior to transfer and are responsible for suppler selection, pricing, and returns for damaged or missing product. Revenue contracts containone performance obligation, which is delivery of the product. The transaction price is adjusted at the date of sale for any applicable sales discounts and an estimate of product returns, which are based on historical patterns, however this is not considered a key judgment. Revenue is recognized when control transfers to the customer at the point in time at which the shipment of the product occurs. This key judgment is determined as the shipping point, which represents the point in time when 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. Virtually all the Company’s sales are paid by credit cards and the Company usually receives the cash settlement intwo tothree banking days. Credit card sales minimize the accounts receivable balances relative to sales. Revenue is recorded net of sales tax, discounts and return allowances. Return allowances are estimated using historical experience and are not material.

Outbound shipping and handling fees are an accounting policy election and are included in product sales upon purchase. 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.

Membership fee revenue is recognized fromtwo models: (1) PetPlus membership for PetCareRx customers, and (2) employer-sponsored partner membership that provide access to the PetPlus program. These memberships offer discounted pricing, free standard shipping, veterinary telehealth services, along with other benefits, which together represent a single stand-ready performance obligation. PetPlus membership are billed annually upfront and automatically renew each year, with revenue recognized ratably over the subscription period.

In addition to annual membership fees earned under the PetPlus program, PetCareRx partner memberships are earned on a month-to-month basis. For the twelve months ended March 31, 2026 and March 31, 2025, membership fees earned under the partner program were $4.5 million and $3.7 million, respectively.

Deferred revenue at March 31, 2025 also includes $1.1 million collected from our customers prior to delivery of AutoShip products, which was subsequently recognized in fiscal 2026.

The following table presents changes in deferred revenue associated with the Company's PetPlus and other programs:

The Company offers a customer loyalty program which is accounted for as a separate performance obligation because it provides customers with a material right. The Company allocates a portion of the transaction price to the loyalty awards based on the relative standalone selling prices and estimated redemption patterns, and recognizes revenue as net sales upon redemption or expiration. As of March 31, 2026 and March 31, 2025, the related contract liability was $1.9 million and $1.7 million, respectively.

The Company has no material contract asset balances as of March 31, 2026 or March 31, 2025.

The Company maintains an allowance for credit losses that the Company estimates will arise from customers’ inability to make required payments, arising from either credit card chargebacks or insufficient funds checks. The Company determines its estimates of the uncollectability of accounts receivable by analyzing historical bad debts and current economic trends in compliance with the provisions of ASC Topic 326, Financial Instruments - Credit Losses. The allowance for credit losses was approximately $25 thousand and $91 thousand at March 31, 2026 and March 31, 2025, respectively.

(3) Segment Reporting

The Company has a single segment that derives sales from customers through the sale of products which are shipped directly to customers. The accounting policies of the Company's single segment are the same as those described in the Company's Significant Accounting Policies.

The Company’s chief operating decision maker (“CODM”) is the Interim Chief Executive Officer. The CODM assesses performance for the segment and decides how to allocate resources based on consolidated net income (loss) and Adjusted EBITDA. The table below reconciles GAAP net loss reported on the accompanying Consolidated Statements of Operations to Adjusted EBITDA. The CODM uses consolidated net income (loss) and Adjusted EBITDA to evaluate income generated from segment assets in deciding whether to reinvest profits into the segment or into other parts of the entity. Adjusted EBITDA is used to monitor budget versus actual results and forecast versus actual results and is utilized when establishing management’s compensation in collaboration with the Board of Directors. Adjusted EBITDA 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 table below provides a summary of significant expense categories regularly provided to the CODM reconciled to Adjusted EBITDA, as well as a reconciliation of net loss to Adjusted EBITDA, for the years ended March 31. The CODM does not review segment assets at a different asset level or category than those disclosed within the consolidated balance sheets.

(1)Principally comprised of other operating and non-operating income and expenses including salaries and wages, operating expenses such as utilities, insurance, professional fees, etc., and impairment of goodwill and intangible assets.

(2)Reversal consists of abatement of certain sales tax accruals.

(3)Consists of professional fees related to the investigation as previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2025.

(4) Acquisition

On April 3, 2023, the Company acquired 100% of the issued and outstanding equity interests of PetCareRx, a New York corporation and a leading supplier of pet food, pet medications, and supplies. The acquisition was completed pursuant to an Agreement and Plan of Merger ("Merger Agreement") by and among the Company, Harry Merger Sub, Inc., a New York corporation and a wholly-owned subsidiary of the Company ("Merger Sub"), PetCareRx and Jeanette Loeb (as representative of the PetCareRx equity holders). The Merger Agreement provided for the Company’s acquisition of PetCareRx pursuant to the merger of Merger Sub with and into PetCareRx, with PetCareRx as the surviving corporation. The aggregate purchase price consideration was $36.1 million and was funded from the Company's cash on hand.

The acquisition of PetCareRx allowed the Company to expand its product catalog, most notably in non-medication products, including food. In addition, PetCareRx brings increased distribution capability and experience, geographic diversity, technology enhancements, additional vendor relationships and a long-tenured and experienced staff.

The Company recognized goodwill of approximately $26.7 million, which is calculated as the excess of the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. Goodwill recognized in the transaction represents synergies or scale achieved by significantly increasing the customer base without adding corresponding levels of additional overhead, the value of additional vendor relationships, including the food manufacturing relationships, a broader product catalog, and an assembled and experienced workforce. These items represent intangible assets that do not qualify for separate recognition. No goodwill is deductible for tax purposes.

The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of April 3, 2023, as calculated by an independent third-party firm. The selected rates of returns were chosen in consideration of the individual risk profiles of the assets, as well as the resulting weighted average return on assets. Intangible assets are considered to be riskier than the overall business, so the Company included a premium to the investment rate of return on the identified intangible discount rates.

The fair values of intangible assets acquired consist of a trade name, customer relationships, and developed technology, which were estimated by applying various discounted cash flow models such as the relief from royalty rate for the trade name, the multi-period excess earnings method for the customer relationships, and the cost to replace method for the developed technology. The fair value measurements were based on significant inputs that are not observable (Level 3). The assumptions made by management in determining the fair value of intangible assets included a discount rate of 12% based on the weighted average cost of capital.

As a result of the acquisition, the Company performed an Internal Revenue Code Section 382 analysis to determine if the net operating losses carried forward would have a utilization limitation. Refer to Note 9, "Income Taxes" for further discussion.

The table below outlines the purchase price allocation of the purchase for PetCareRx to the acquired identifiable assets, liabilities assumed and goodwill (in thousands):

The Company incurred a total of $1.7 million in acquisition related costs that were expensed as incurred and recorded in general and administrative expenses in the Company’s Consolidated Statements of Operations, of which $0.5 million was recorded in fiscal year 2023, and $1.2 million was recorded in fiscal year 2024. These costs include banking, legal, accounting, and consulting fees related to the acquisition.

(5) Property and Equipment, Net

Major classifications of property and equipment consist of the following (in thousands):

For Fiscal Year 2026, Fiscal Year 2025, and Fiscal Year 2024, the Company recorded depreciation and amortization expense on property and equipment of $7.4 million, $5.1 million, and $5.1 million, respectively.

The Company evaluated its tangible property and equipment for indicators of impairment as of March 31, 2026 and 2025 and concluded that no impairment existed.

(6) Intangible and Other Assets, Net

Intangible assets and other assets, net consisted of the following (in thousands):

Amortization expense for intangible assets was $2.0 million, $2.0 million and $2.0 million for the twelve months ended March 31, 2026, 2025 and 2024, respectively.

The indefinite life intangibles are not being amortized and are subject to an annual review for impairment, or more frequently if circumstances indicate an impairment may have occurred, in accordance with the ASC Topic 350, Goodwill and Other Intangible Assets. The Company recognized non-cash impairment charges of $0.6 million, $1.2 million and $0 as of March 31, 2026, 2025 and 2024, respectively, which is reflected in "Impairment of goodwill and intangible assets" on the Consolidated Statements of Operations.

Estimated amortization expense of intangible assets during the next five fiscal years is as follows:

In April 2022, the Company purchased a 5% minority interest in Vetster Inc. (“Vetster”), a Canadian veterinary telehealth company, in the amount of $5.0 million and received warrants for additional equity in Vetster, which are tied to future performance milestones. In October 2023, the Company purchased additional shares in Vetster in the amount of $0.3 million. This increased the minority interest investment to $5.3 million. Following this round, the Company’s minority ownership changed to approximately 4.8% of Vetster’s outstanding shares. The minority interest investment is being valued on the cost basisand the investment will be evaluated periodically for any impairment. At March 31, 2026 and 2025, we evaluated the investment in accordance with ASC Topic 321, Accounting for Equity Interests and determined it was not impaired.

Additionally, in April 2022, the Company engaged in athree-year partnership agreement with Vetster. Under the terms of the agreement, the Company became the exclusive pet products e-commerce provider for Vetster and Vetster became the exclusive provider of telehealth and telemedicine services to the Company. While the initial contract was terminated in February 2025, the Company and Vetster continued to work on a non-exclusive basis under similar terms through March 31, 2026.

Under the terms of the agreement, Vetster earned from 10% to 20% of revenue generated from its customers on orders fulfilled by the Company. For the years ended March 31, 2026, 2025, and 2024 the Company earned approximately $0.6 million, $1.5 million, and $0.8 million in net sales for orders placed through Vetster and incurred fees to Vetster of approximately $0.1 million, $0.3 million, and $0.2 million, respectively.

(7) Accrued Expenses and Other Current Liabilities

Major classifications of accrued expenses and other current liabilities consist of the following (in thousands):

(8) Leases

The Company’s leasing activities primarily consist of real estate leases acquired during the acquisition of PetCareRx for use in the business operations. The leases had initial terms ranging from 5 years to 10 years. Some of the initial lease terms have already matured and the remaining leases have maturity dates ranging through fiscal years 2027 and 2028. The Company assesses whether each lease is an operating lease or a finance lease at the lease commencement date. The Company does not have any material leases, individually or in the aggregate, classified as a finance lease.

Variable Lease Costs

Certain of the Company’s leases require payments for taxes, insurance, and other costs applicable to the property, in addition to the minimum lease payment. These costs are considered variable costs which are based on actual expenses incurred by the lessor. Therefore, these amounts are not included in the calculation of the right-of-use assets and lease liabilities.

The Company has lease agreements which provide for fixed and scheduled escalations, which are included in the calculation of the right-of-use assets and lease liabilities.

Options to Extend or Terminate Leases

The Company’s leases may contain an option to extend the lease term for periods fromone tofive years The exercise of lease renewal options is at the Company’s sole discretion. If it is reasonably certain that the Company will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of the Company’s right-of-use assets and lease liabilities. The Company’s leases do not generally contain options to early terminate.

Other Lease items

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company's operating leases are included in operating lease right-of-use assets, other current liabilities, and operating lease liabilities on the accompanying Consolidated Balance Sheets.

Discount Rate and Lease Term

As of March 31, 2026, the weighted average remaining lease term and discount rate for the Company’s operating leases was 1 year and 3.6%, respectively. As of March 31, 2025, the weighted average remaining lease term and discount rate for the Company’s operating leases were 2 years and 3.6%, respectively. As the rate implicit in the lease is generally not readily determinable for the Company’s operating leases, the Company uses its estimated incremental borrowing rate based on the information available at the date of acquisition, April 3, 2023, in determining the present value of future payments.

Lease Costs and Activity

The Company’s lease costs as recorded in the general and administrative costs and activity are as follows (in thousands):

Supplemental cash flow information for the fiscal years ended March 31, 2026, 2025 and 2024 are as follows (in thousands):

Maturity of Lease Liabilities

The maturity of the Company’s lease liabilities on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on the Company’s Consolidated Balance Sheet as of March 31, 2026 were as follows (in thousands):

(9) Income Taxes

All income before provision for income taxes is domestic.

The components of the income tax provision consist of the following (in thousands):

We adopted ASU 2023-09 on a prospective basis in fiscal year 2026. The reconciliation of income tax provision computed at the U.S. federal statutory tax rates to income tax expense is as follows (in thousands):

The differences between the effective income tax rate and the statutory U.S. federal income tax rate are as follows:

In fiscal 2026, state and local income taxes in Florida comprise of the majority of the state and local income taxes, net of federal effect category. In 2025, state and local income taxes in Florida comprise the majority of the state and local income taxes, net of federal effect category.

On July 4, 2025, the “One Big Beautiful Bill Act”, or “OBBBA,” was signed into law, which represents the enactment date under U.S. GAAP. Key corporate tax provisions include the restoration of 100% bonus depreciation, immediate expensing for domestic research and experimental expenditures, changes to Section 163(j) interest limitations, updates to Global Intangible Low-Taxed Income (“GILTI”), and Foreign-Derived Intangible Income (“FDII”) rules, amendments to energy credits, and expanded Section 162(m) aggregation requirements.

In accordance with ASC 740, the effects of the new tax legislation are recognized in the period of enactment. Management has evaluated the provisions of the OBBBA, recalculated temporary differences, reassessed valuation allowances, and considered any necessary adjustments. Based on this evaluation, management concluded that the effects of the OBBBA are not material to the Company’s consolidated financial statements for the twelve months ended March 31, 2026. Management will continue to monitor forthcoming guidance, interpretations, and technical clarifications to assess whether any future adjustments or additional disclosures may be required.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows (in thousands):

The Company has evaluated the positive and negative evidence bearing upon the realizability of its net deferred tax assets, which are composed primarily of net operating losses and capitalized research and development costs. Management has considered the Company’s cumulative net losses in recent years and limited evidence of sustainable taxable income in future periods, and concluded that it is more likely than not that the Company will not recognize the benefits of deferred tax assets. As a result, a full valuation allowance has been established against the Company’s net deferred tax assets as of March 31, 2026. As of March 31, 2026, the Company recorded a deferred tax liability of $175 thousand, primarily attributable to acquired indefinite-lived intangibles with no corresponding tax basis. For accounting purposes, the intangible assets will not be amortized and subject to impairment review and testing. A portion of these deferred tax liabilities are not available as a source of income to support the realization of deferred tax assets because they are not expected to reverse in the same period as deferred tax assets. As a result, the Company has recorded a deferred tax liability for the portion of the liability that cannot be offset with indefinite lived deferred tax assets. Management reevaluates the positive and negative evidence at each reporting period. The valuation allowance increased by $7.7 million in fiscal year 2026 as compared to fiscal year 2025.

The provisions of FASB ASC 740-10-25-5 prescribe the minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. Additionally, FASB ASC 740-10-25-5 provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. Under FASB ASC 740-10-25-5, an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued are reflected as a reduction of the overall income tax provision. As of March 31, 2026 and 2025, we did not have any uncertain tax positions.

At March 31, 2026, the Company had $36.0 million of federal net operating loss carryforwards some of which begin to expire in fiscal 2027. The Company also had $33.4 million in state net operating loss carryforwards which begin to expire in fiscal 2027. In fiscal 2024 the Company acquired PetCareRx, a loss corporation. The tax attributes acquired are subject to Internal Revenue Code Section 382 which limits the utilization annually. Outlined below are the tax attribute balances remaining as of March 31, 2026 (in thousands).

A summary of income taxes paid, net of refunds received is as follows (in thousands):

(10) Shareholders’ Equity

Preferred Stock

In April 1998, the Company issued 250,000 shares of its $.001 par value preferred stock at a price of $4.00 per share, less issuance costs of $112 thousand. Each share of the preferred stock is convertible into approximately 4.05 shares of common stock at the election of the shareholder. The shares have a liquidation value of $4.00 per share and may pay dividends at the sole discretion of the Company. The Company does not anticipate paying dividends to the preferred shareholders in the foreseeable future. Each share of preferred stock is entitled toone vote on all matters submitted to a vote of shareholders of the Company. At March 31, 2026 and 2025,2,500 shares of the convertible preferred stock remained unconverted and outstanding.

On December 2, 2024, the Board of Directors (the “Board”) of the Company adopted a rights agreement and declared a dividend ofone right (a “Right”) for each outstanding share of Company common stock, to shareholders of record at the close of business on December 16, 2024 (the “Record Date”). The description and terms of the Rights are set forth in a rights agreement, dated as of December 3, 2024 (the “Rights Agreement”), between the Company and Continental Stock Transfer & Trust Company, a federally chartered trust company, as rights agent.

The Board adopted the Rights Agreement to protect the investment of shareholders during a period in which it believes shares of the Company do not reflect the inherent value of the business or its long-term growth potential, and during which there have been recent significant accumulations of common stock by certain shareholders. The Rights Agreement is intended to enable shareholders to realize the long-term value of their investment in the Company by reducing the likelihood that any entity, person, or group is able to gain a control or control-like position in the Company through open market accumulation without paying all shareholders an appropriate control premium or providing the Board sufficient opportunity to make informed judgments and take actions that are in the best interests of all shareholders.

In general terms, the Rights Agreement imposes significant dilution upon any person or group (other than the Company and certain other excluded persons and exempt persons), that is or becomes the beneficial owner of 12.5% or more of the common stock without the prior approval of the Board following the first public announcement by the Company of the adoption of the Rights Agreement. The term “beneficial ownership” is defined in the Rights Agreement and includes, among other things, certain derivative arrangements.

In general, each Right entitles its registered holder, subject to the terms of the Rights Agreement, to purchase from the Companyone one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share (“Preferred Stock”), of the Company at an exercise price of $27.00 per Right, subject to adjustment under certain circumstances (the “Purchase Price”). The Rights will become exercisable if (among other things) any person or group acquires 12.5% or more of the outstanding common stock, including through derivatives agreements, without the approval of the Board (an “Acquiring Person”). If a person or group becomes an Acquiring Person, all holders of Rights except the Acquiring Person or any associate or affiliate thereof may, upon exercise of a Right, purchase for the Purchase Price shares of Common Stock with a market value oftwo times the Purchase Price, based on the market price of the Common Stock prior to such acquisition. If the Company is acquired in a merger or similar transaction after an Acquiring Person becomes such, all holders of Rights except the Acquiring Person or any associate or affiliate thereof may, upon exercise of a Right, purchase for the Purchase Price shares of the acquiring company with a market value oftwo times the Purchase Price, based on the market price of the acquiring company’s stock prior to such transaction. Any Rights held by an Acquiring Person will be void and may not be exercised.

On November 26, 2025, the Board unanimously approved an amendment to the Rights Agreement, pursuant to which the expiration date of the Rights Agreement was extended forone year from the close of business on December 2, 2025 until the close of business on December 2, 2026. All other terms and conditions of the Rights Agreement remain unchanged.

After giving effect to such amendment, the Rights will expire on the earliest to occur of (a) the close of business on December 2, 2026, (b) the time at which the Rights are redeemed by the Company (as provided in the Rights Agreement), or (c) the time at which the Rights are exchanged by the Company (as provided in the Rights Agreement). There was no impact to the Company’s current period financial statements from adopting this Rights Agreement.

In connection with the adoption of the Rights Agreement, the Board adopted Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company (the “Articles of Amendment”), which designates the rights, preferences, and privileges of 100,000 shares of a new series of the Company’s preferred stock, par value $0.001 per share, designated as Series A Junior Participating Preferred Stock. The Company filed the Articles of Amendment with the Secretary of State of the State of Florida on December 3, 2024.

Dividends

Payment of dividends is subject to declaration by the Board of Directors. Factors considered in determining dividends include our profitability and expected capital needs. During fiscal 2024, our Board of Directors declared the following dividends:

In October 2023, our Board of Directors elected to suspend the quarterly dividend for the second quarter of fiscal year 2024, and in February 2024, our Board of Directors elected to suspend the quarterly dividend indefinitely. This move is intended to focus use of the Company’s existing cash flow on growth and other higher return initiatives. The Board of Directors reviews and discusses the capital allocation needs of the Company, at a minimum, on a quarterly basis. The declaration and payment of future dividends is discretionary and will be subject to a determination by the Board of Directors.

(11) Share-Based Compensation

The Company's incentive equity grants have been made under the following plans:

•In July 2015, the Company’s 2015 Outside Director Equity Compensation Restricted Stock Plan (“2015 Director Plan”) became effective upon the approval of the plan by the Company’s shareholders. The 2015 Director Plan authorized 400,000 shares of the Company's common stock available for issuance under the plan and provides for an automatic increase every year in the amount of shares available for issuance under the plan of 10% of the shares authorized under the plan.

•In July 2016, the Company’s 2016 Employee Equity Compensation Restricted Stock Plan (“2016 Employee Plan”) became effective upon the approval of the plan by the Company’s shareholders. The 2016 Employee Plan authorized 1,000,000 shares of the Company's Common stock available for issuance under the plan. In July 2022, the Company’s 2022 Employee Equity Compensation Restricted Stock Plan (“2022 Employee Plan”) became effective upon the approval of the plan by the Company’s shareholders.

•The 2022 Employee Plan replaced the 2016 Employee Plan, and as of April 2023 no further awards were granted, or will be granted, under the 2016 Employee Plan. The 2022 Employee Plan authorized 1,000,000 shares of the Company's common stock available for issuance.

•On August 8, 2024, the Company adopted the PetMed Express, Inc. 2024 Omnibus Incentive Plan (the "2024 Omnibus Plan") pursuant to which the Company reserved 850,000 shares of common stock, par value $.001 per share, for the issuance of equity awards granted under such plan.

•On September 27, 2024, the Company adopted the PetMed Express, Inc. 2024 Inducement Incentive Plan (the "2024 Inducement Plan")pursuant to which the Company reserved 350,000 shares of common stock, par value $.001 per share, of the Company’s common stock (subject to the adjustment provisions of the Inducement Plan) for the issuance of equity awards granted under the Inducement Plan.

The Company records compensation expense associated with restricted stock in accordance with ASC Topic 718, Share Based Payments (ASU 2016-09). The value of the restricted stock is determined based on the market value of the stock at the issuance date. The restriction period or forfeiture period is determined by the Company’s Compensation and Human Capital Committee and is to be no less than 1 year and no more thanten years unless otherwise specified by the Compensation and Human Capital Committee. The following table presents the number of common shares issued under each of the Company's plans:

As of March 31, 2026, all shares in the 2022 Employee Plan, 2016 Employee Plan and 2015 Director Plan were issued subject to a restriction or forfeiture or vesting period that lapses ratably on the first, second, and third anniversaries of the date of grant, and the fair value of which is being amortized over aone tothree-year restriction period, with the exception of performance restricted shares which were issued to the Company's former Chief Executive Officer and the former Company's Chief Financial Officer and Company's current Chief Executive Officer.

For the fiscal years ended March 31, 2026, 2025, and 2024, the Company recognized compensation expense (reversal) related to the 2016 and 2022 Employee Plan, the 2015 Director Plan, 2024 Omnibus Plan and 2024 Inducement Plan of $1.4 million, $(6.6) million, and $6.9 million, respectively. All stock-based compensation expense is recognized as a payroll-related expense and it is included within the general and administrative expenses line item within the Company’s Consolidated Statements of Operations, and the offset is included in the additional paid-in capital line item of the Company’s Consolidated Balance Sheets. See Note 9, "Income Taxes" for tax impact of the Company's stock compensation expense.

Restricted Stock Awards

For the year ended March 31, 2026, restricted stock award ("RSA") activity under the Plans was as follows:

•At March 31, 2026 and 2025, there were 339,104 and 17,893, RSAs subject to restriction and forfeiture outstanding, respectively.

•During the fiscal years ended March 31, 2026 and 2025, the Company issued, net of forfeitures,352,905 and (561,209) restricted shares, respectively.

•The weighted-average grant date fair value of restricted shares issued was $2.58 for fiscal year 2026. There wereno restricted shares issued for fiscal year 2025. For the fiscal years ended March 31, 2026, 2025, and 2024, the Company recognized compensation expense (reversal) related to RSAs of $0.3 million, $(8.1) million, and $6.6 million, respectively.

•The total fair market value of restricted shares released from restrictions was $0.1 million and $0.5 million for fiscal years 2026 and 2025, respectively.

•At March 31, 2026 and 2025, there were $0.6 million and $0.1 million of unrecognized compensation costs related to the restricted stock subject to restriction and forfeiture awards, respectively, which is expected to be recognized over the remaining weighted average restriction and forfeiture period of 1.3 years and 4.6 months for fiscal 2026 and 2025, respectively.

Restricted Stock Units

The Company first granted restricted stock units ("RSUs") in the year ended March 31, 2024. The fair value assigned to RSUs is the market price of the Company’s stock on the grant date. The vesting period for employees and members of the Board of Directors ranges fromone tothree years.

For the year ended March 31, 2026, RSU activity under the Plans was as follows:

•The total grant-date fair value of RSUs granted during the twelve months ended March 31, 2026 and 2025 was $29 thousand and $5.4 million, respectively.

•For the twelve months ended March 31, 2026, 2025 and 2024, the Company recorded stock-based compensation related to RSUs of $1.1 million , $1.5 million and $0.3 million, respectively.

•At March 31, 2026 and 2025, there were $0.6 million and $4.2 million of unrecognized compensation costs related to RSUs subject to restriction and forfeiture awards, respectively, which is expected to be recognized over the remaining weighted average restriction and forfeiture period of 1.45 years and 2.3 years for fiscal 2026 and 2025, respectively.

Performance Stock Units

The Company first granted performance stock units ("PSUs") in the year ended March 31, 2024. The fair value assigned to PSUs is determined using the market price of the Company’s stock on the grant date for awards with a performance condition, and by using a Monte Carlo simulation for awards with a market condition. Existing PSUs with a performance condition vest overone year. Existing PSUs with a market condition vest over three years. Stock-based compensation costs associated with PSUs with a performance condition are re-assessed each reporting period based upon the estimated performance attainment on the reporting date until the performance conditions are met. The ultimate number of shares of common stock that are issued to an employee is the result of the actual performance of the Company at the end of the performance period compared to the performance targets and generally ranges from 0% to 200% of the initial PSU grant.

For the year ended March 31, 2026, PSU activity under the Plans was as follows:

•The total grant-date fair value of PSUs granted during the twelve months ended March 31, 2025 was $0.5 million. The wereno PSUs granted during the twelve months ended March 31, 2026.

•For the twelve months ended March 31, 2026 and 2025, the Company recorded stock-based compensation (reversal) related to PSUs of $(35) thousand and $(1) thousand, respectively.

•At March 31, 2025 there were $475 thousand unrecognized compensation costs related to PSUs subject to restriction and forfeiture awards which is expected to be recognized over the remaining weighted average restriction and forfeiture period 2.8 years for fiscal 2025. At March 31, 2026 there wereno unrecognized compensation costs related to PSUs subject to restriction and forfeiture award.

(12) Fair Value Measurements

The Company carries cash and cash equivalents and investments at fair value in the 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-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 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

At March 31, 2026 and 2025 the Company had cash and cash equivalents of $21.4 million and $54.7 million, respectively, which includes investments in money market funds which are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices.

The following tables summarize the assets measured at fair value on a recurring basis as of March 31, 2026 and March 31, 2025 by level within the fair value hierarchy (in thousands):

(13) Net (Loss) Income Per Share

In accordance with the provisions of ASC Topic 260, Earnings Per Share basic net (loss) income per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per common share includes the dilutive effect of potential restricted stock and the effects of the potential conversion of preferred shares, calculated using the treasury stock method. Unvested restricted stock, and convertible preferred shares issued by the Company represent the only dilutive effect reflected in diluted weighted average shares outstanding.

The following is a reconciliation of the numerators and denominators of the basic and diluted net (loss) income per share computations for the periods presented (in thousands, except for share and per share amounts):

At March 31, 2026, 2025, and 2024, 632,128,1,027,909, and 827,863 shares of common restricted stock, respectively, were excluded from the computations of diluted net income per common share, as their inclusion would have had an anti-dilutive effect on diluted (net loss)/net income per common share.

(14) Commitments and Contingencies

Legal Matters and Routine Proceedings

The Company has settled complaints that had been filed with various states’ pharmacy boards in the past. There can be no assurances made that other states will not attempt to take similar actions against the Company in the future. The Company also intends to vigorously defend its trade or service marks. There can be no assurance that the Company will be successful in protecting its trade or service marks. Legal costs related to the above matters are expensed as incurred. From time to time, the Company may be involved in and subject to disputes and legal proceedings, as well as demands, claims and threatened litigation that arise in the ordinary course of its business. These proceedings may include allegations involving business practices, infringement of intellectual property, employment or other matters. The ultimate outcome of any legal proceeding is often uncertain, there can be no assurance that the Company will be successful in any legal proceeding, and unfavorable outcomes could have a negative impact on our results of operations and financial condition. In accordance with ASC Topic 450-20, Loss Contingencies, the Company records a liability in its financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews the status of each significant matter each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary to make the financial statements not misleading. If the loss is not probable and cannot be reasonably estimated, a liability is not recorded in the Company’s financial statements. Gain contingencies are not recorded until they are realized. Legal costs related to any legal matters are expensed as incurred.

On April 18, 2024, Plaintiff Timothy Fitchett (“Plaintiff”) filed an action against the Company in the Court of Common Pleas of Allegheny County, Pennsylvania, on behalf of himself and on behalf of a class of others similarly situated. Plaintiff alleges that the Company violated Pennsylvania’s Unfair Trade Practices and Consumer Protection Law by representing “reg.” prices for products which the Company allegedly never charged for those products. On May 13, 2024, the Company removed the matter to the U.S. District Court for the Western District of Pennsylvania in Pittsburgh. The Company successfully opposed the Plaintiff's motion to remand the case back to the Court of Common Pleas. On the face of the Complaint, Plaintiff is seeking damages for himself in the amount of the allegedly illusory discounts he allegedly believed he was receiving when purchasing products from the Company or, in the alternative, a complete refund of amounts he paid to the Company, and he is also seeking a liability determination for members of the proposed class. The Company denies liability in this matter and intends to defend the action accordingly. The Company cannot determine materiality or estimate a range of potential liability, if any, at this time if the Company were determined to be liable.

On February 14, 2025, Plaintiffs Ashley Bird, Tyler Dvornski, and Tiffany Hughes (“Plaintiffs”) filed an action in the Northern District of New York on behalf of themselves and a class of others similarly situated alleging that the Company misrepresented that its products were on sale by showing a “regular” strikethrough price, when the products were never sold for the strikethrough price. Plaintiffs allege that by using this “false reference price” or “false discount,” the Company artificially inflated its prices and charged consumers more than it otherwise could. Plaintiffs allege that these purported practices violate New York General Business Law §§ 349 and 350 as well as California’s Unfair Competition Law and California’s False Advertising Law. After the Company made a motion to dismiss the Complaint, Plaintiffs filed an Amended Complaint, which the Company moved to dismiss. The motion to dismiss the Amended Complaint was granted. Thereafter, Plaintiffs filed a motion to vacate the dismissal Order and amend the Amended Complaint. That motion has been fully briefed and remains pending.

(15) Employee Benefit Plan

The Company maintains a 401(k) Savings Plan for eligible employees. The plan is a defined contribution plan that is administered by the Company. All regular, full-time employees are eligible for voluntary participation upon completing 90 days of service and having attained the age of 21. The plan provides for growth in savings through contributions and income from investments. It is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. Plan participants are allowed to contribute a specified percentage of their base salary. The Company matches 100% of the first 4% of the employee's contribution. The matching contribution is funded subsequent to the calendar year. During the fiscal years ended March 31, 2026, 2025, and 2024, the

Company recorded $371 thousand, $309 thousand, and $350 thousand, respectively, of 401(k) matching contribution and administration expense to general and administrative expenses. In accordance with the plan documents, the Company can elect to make discretionary contributions, however, none were made during the fiscal years ended March 31, 2026 and March 31, 2025.

(16) Related Party Transaction

In fiscal 2024 the Company entered into a master services agreement with Fabric, Inc (“Fabric”), a privately-held company. Under this agreement, Fabric will provide cloud-based product services to the Company with aone-year term with auto-renewal unless either party provides notice at least 90 days in advance. Per the terms of the agreement, the Company will pay Fabric $115,000 the first year and $100,000 for each potential year thereafter with potential changes in the amounts paid based on actual usage of Fabric’s services.

The Company's former Chief Executive Officer and President, who departed the Company in August 2025, was an equity holder in Fabric and served on Fabric's Board of Directors during her tenure with the Company. Consequently, Fabric is no longer considered a related party to the Company subsequent to her departure.

During the fiscal year ended March 31, 2025 the company paid Fabric approximately $105 thousand under this agreement for services rendered. During the fiscal year ended March 31, 2026, the company madeno payments to Fabric under this agreement for services rendered while Fabric was considered a related party. As of March 31, 2026 and 2025, there wereno amounts owed by the Company to Fabric.

(17) Unsolicited and Non-Binding Acquisition Proposals

In December 2025, the Company receivedtwo unsolicited, non-binding preliminary proposals fromtwo separate third parties to acquire all of the outstanding shares of Common Stock of the Company at prices ranging from $4.00 to $4.25 per share in cash, subject to customary conditions, including the satisfactory completion of due diligence and the negotiation and execution of a mutually acceptable definitive agreement. In response to the receipt of these proposals, the Board, consistent with its fiduciary duties and in consultation with its financial and legal advisors, carefully evaluated the two unsolicited proposals and directed its financial advisor to actively solicit interest in a potential sale transaction from other strategic and financial sponsors that the Company and its financial advisor believed might have an interest in, and the financial capacity to consummate, a potential acquisition of the Company at a price and on terms that would maximize value for the Company's stockholders. Following this process and after careful deliberation and consideration of the alternatives reasonably available to the Company, the Board determined that it is in the best interests of the Company and its stockholders not to proceed with either of the publicly announced proposals, as a result of which the Company is continuing to operate as an independent, publicly traded company. However, the Board remains open to considering any inbound indications of interest with respect to a potential transaction that may be received in the future and will continue to act in accordance with its fiduciary duties to evaluate any such proposals should they arise.