Petmed Express (PETS) risk factors, FY2025 10-K

Regulatory Risks

1. 01Any failure to comply with various state or federal regulations covering our pet health business, including the dispensing of prescription pet medications may subject us to reprimands, sanctions, probations, fines, suspensions, or the loss of one or more of our pharmacy licenses

Business Risks

1. 02Our failure to properly manage our inventory may result in excessive inventory carrying costs, or inadequate supply of products, which could materially adversely affect our financial condition and results of operations
2. 03Resistance from veterinarians to authorize prescriptions, or attempts or efforts by veterinarians to discourage pet owners from purchasing from us could cause our sales to decrease and could materially adversely affect our financial condition and results of operations
3. 04Significant portions of our sales are made to residents of eight states. If we should lose our pharmacy license in one or more of these states, our financial condition and results of operations would be materially adversely affected
4. 05We have direct buying relationships with all the major pet medication manufacturers and each contractual relationship depends on our compliance with each respective manufacturer’s minimum advertised pricing policies (MAPP)
5. 06The loss of any of our key suppliers would negatively impact our business
6. 07Shipping is a critical part of our business and any changes in, or disruptions to, our shipping arrangements could adversely affect our business, financial condition, and results of operations
7. 08The quality of our customer service and support is important to our customers, and if we fail to provide adequate levels of customer service and support, we could lose customers, which would harm our business
8. 09The content of our websites could expose us to various kinds of liability, which, if prosecuted successfully, could negatively impact our business
9. 10We may not be able to protect our intellectual property rights, and/or we may be found to infringe on the proprietary rights of others
10. 11If we are unable to protect our Internet addresses or to prevent others from using Internet addresses that are confusingly similar, our business may be adversely impacted
11. 12Since most of our operations are housed in a single location, we are more susceptible to a business interruption in the event of damage to, or disruptions in, our facility, particularly with respect to extreme weather events
12. 13A failure or misuse of our information systems and customer-facing technology systems, including our online payment methods, could adversely affect our results of operations, expose us to third-party claims, or increase our exposure to fraud and other risks
13. 14Our failure or the failure of third-party service providers to protect our websites, networks, and systems against cybersecurity incidents, or otherwise to protect our confidential information, could damage our reputation and brands and substantially harm our business, financial condition, and results of operations
14. 15Our migration of data and systems to a new information technology platform may disrupt our operations
15. 16interruptions may increase. Further, our transition could involve significant time and expense and could negatively impact our ability to deliver our products and services, which could harm our financial condition and results of operations
16. 17We face the risk of litigation resulting from unauthorized text messages sent in violation of the Telephone Consumer Protection Act
17. 18Our operating results are difficult to predict and may fluctuate, and a portion of our sales are seasonal
18. 19Uncertainties in economic conditions and their impact on consumer spending patterns could adversely impact our business, financial condition, and results of operations
19. 20increased acceptance and utilization of telemedicine services, but it is uncertain whether such increase in demand will continue
20. 21Evolving foreign trade policy by the United States or other countries or the imposition of tariffs on imported goods may affect our business

Financial Risks

1. 22We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability and potentially disrupt our business
2. 23We may face litigation and other risks as a result of the restatements described in this Comprehensive Form 10-K and the Amended Reports and material weaknesses in our internal control over financial reporting

Risks Relating to Taxes

1. 24Taxing authorities may successfully assert that we should have collected, or in the future should collect, sales and use, value added, or similar taxes, and any such assessments could adversely affect our business, financial condition, and results of operations
2. 25requiring us to register, calculate, collect, and remit taxes on sales in their jurisdictions. Additionally, states and some local tax jurisdictions have differing rules and regulations governing sales and use taxes, which are subject to varying interpretations that may change over time
3. 26Changes in tax laws or regulations in the various tax jurisdictions we are subject to could increase our cost of doing business

Industry Risks

1. 27We face significant competition from veterinarians and online and traditional retailers, as well as challenges from strategic alliances amongst our competitors, and may not be able to compete profitably with them
2. 28Product recalls and concerns regarding the safety and quality of the pet products we sell could affect our business
3. 29Pandemics or other health crises, such as the possible resurgence of the COVID-19 pandemic, may adversely affect our results of operations
4. 30Our stock price fluctuates from time to time and may fall below expectations of securities analysts and investors, and could subject us to litigation, which may result in you suffering a loss on your investment
5. 31We may issue additional shares of preferred stock that could defer a change of control or dilute the interests of our common shareholders. Our charter documents could defer a takeover effort which could inhibit your ability to receive an acquisition premium for your shares
6. 32Our ability to pay regular dividends to our shareholders and the amounts of any such dividends are subject to the discretion of the Board and may be limited by our financial condition, or limitations under Florida law