PETMED EXPRESS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

June 30,

March 31,

2011

2011

ASSETS

Current assets:

   Cash and cash equivalents

$

49,413 

$

49,660 

   Short term investments - available for sale

10,219 

10,116 

   Accounts receivable, less allowance for doubtful

      accounts of $7 and $6, respectively

2,304 

1,985 

   Inventories - finished goods

26,074 

25,140 

   Prepaid expenses and other current assets

1,434 

1,036 

   Deferred tax assets

1,177 

1,003 

   Prepaid income taxes

- 

664 

          Total current assets

90,621 

89,604 

   Long term investments

4,761 

12,390 

   Property and equipment, net

3,174 

3,433 

   Intangible asset

860 

860 

Total assets

$

99,416 

$

106,287 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

   Accounts payable

$

8,152 

$

6,452 

   Accrued expenses and other current liabilities

2,480 

2,509 

   Income taxes payable

2,303 

- 

          Total current liabilities

12,935 

8,961 

Deferred tax liabilities

340 

321 

Total liabilities:

13,275 

9,282 

Commitments and contingencies

Shareholders' equity:

   Preferred stock, $.001 par value, 5,000 shares authorized;

      3 convertible shares issued and outstanding with a

      liquidation preference of $4 per share

9 

9 

   Common stock, $.001 par value, 40,000 shares authorized;

      21,259 and 22,331 shares issued and outstanding, respectively

21 

22 

   Retained earnings

86,159 

97,115 

   Accumulated other comprehensive loss

(48)

(141)

          Total shareholders' equity

86,141 

97,005 

Total liabilities and shareholders' equity

$

99,416 

$

106,287 

 Three Months Ended

 June 30,

2011

2010

 Sales

$

73,578 

$

74,369

 Cost of sales

49,468 

47,143

 Gross profit

24,110 

27,226

 Operating expenses:

      General and administrative

6,104 

6,208

      Advertising

10,100 

8,841

      Depreciation

341 

350

 Total operating expenses

16,545 

15,399

 Income from operations

7,565 

11,827

 Other income (expense):

      Interest income, net

86 

66

      Other, net

(1)

3

 Total other income

85 

69

 Income before provision for income taxes

7,650 

11,896

 Provision for income taxes

2,813 

4,671

 Net income

$

4,837 

$

7,225

 Net income per common share:

       Basic

$

0.22 

$

0.32

       Diluted

$

0.22 

$

0.32

 Weighted average number of common shares outstanding:

       Basic

21,648 

22,722

       Diluted

21,767 

22,868

 Cash dividends declared per common share

$

0.125 

$

0.100

PETMED EXPRESS, INC. AND SUBSIDIARIES

CONSENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (In thousands) (Unaudited)

 Three Months Ended

 June 30,

2011

2010

 Cash flows from operating activities:

    Net income

$

4,837 

$

7,225 

    Adjustments to reconcile net income to net cash

     provided by operating activities:

        Depreciation

341 

350 

        Share based compensation

565 

523 

        Deferred income taxes

(155)

376 

        Bad debt expense

19 

7 

        (Increase) decrease in operating assets

           and increase (decrease) in liabilities:

             Accounts receivable

(338)

(582)

             Inventories - finished goods

(934)

13,279 

             Prepaid income taxes

664 

330 

             Prepaid expenses and other current assets

(398)

(273)

             Accounts payable

1,700 

1,244 

             Income taxes payable

2,303 

3,842 

             Accrued expenses and other current liabilities

(60)

143 

 Net cash provided by operating activities

8,544 

26,464 

 Cash flows from investing activities:

    Net change in investments

7,619 

(10,017)

    Purchases of property and equipment

(82)

(130)

 Net cash provided by (used in) investing activities

7,537 

(10,147)

 Cash flows from financing activities:

    Dividends paid

(2,751)

(2,278)

    Purchases of treasury stock

(13,577)

(671)

    Proceeds from the exercise of stock options

- 

252 

    Tax benefit related to stock options exercised

- 

124 

 Net cash used in financing activities

(16,328)

(2,573)

 Net (decrease) increase in cash and cash equivalents

(247)

13,744 

 Cash and cash equivalents, at beginning of period

49,660 

53,143 

 Cash and cash equivalents, at end of period

$

49,413 

$

66,887 

 Supplemental disclosure of cash flow information:

    Dividends payable in accrued expenses

$

31 

$

20