The company markets its products through national advertising campaigns aimed at increasing “PetMeds” brand name recognition, increasing traffic to its website at www.petmeds.com, acquiring new customers, and increasing repeat purchases. About 84% of all online sales generated for the quarter ended
SIGNIFICANT ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of operations contained herein are based on our condensed consolidated financial statements and the data used to prepare them. The company’s condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles
The company generates revenue by selling pet drug products and pet supplies primarily to retail customers. Some pet supplies shown on the company’s website are shipped to customers. The company considers itself the asset in the arrangement because the company controls the specific commodity before it is transferred to the customer. Revenue contracts contain one performance obligation, which is to deliver the product; Customer care and support is not a material contract right. The transaction price is adjusted at the date of sale for any applicable sales discounts and an estimate for product returns, which are estimated based on historical patterns; However, this is not considered a major ruling. There are no amounts excluded from the variable consideration. Revenue is recognized when control is transferred to the customer at the time the product is shipped.
Outbound shipping and handling charges are a choice of accounting policy and are included in sales where the company considers itself the main in the arrangement due to the responsibility of selecting suppliers and pricing discretion. Freight costs associated with outbound shipping after product control has been transferred to the customer are an accounting policy choice and are calculated as implementation costs and included in the cost of sales. Almost all of the company’s sales are paid for by credit cards and the company typically receives the cash settlement within two to three banking days. Credit card sales reduce the accounts receivable balances related to the sales.
The Company maintains a provision for doubtful accounts for losses which the Company estimates will arise from the inability of customers to make required payments, arising either from credit card chargebacks or insufficient funds checks. The company determines its estimates of uncollectibility of receivables through analysis of historical bad debts and current economic trends. The provision for doubtful accounts was approx
Valuation of inventory
Inventory consists of prescription and nonprescription pet medications and pet supplies available for sale that are priced at cost or net realizable value, whichever is the lower, using the weighted average cost method. The company notes its inventory for estimated obsolescence. Stock reserve was approx
The company’s advertising expenditures mainly consist of Internet marketing, direct/print mail, and television advertising. Internet costs are paid in the month incurred and direct mail/print advertising costs are paid when related brochures and postcards are produced, distributed or replaced. Television advertising costs are spent where television advertisements are broadcast.
Accounting for income taxes
The Company calculates income taxes under the provisions of ASC Topic 740 (“Income Tax Accounting”), which generally require recognition of deferred tax assets and liabilities for expected future tax benefits or consequences of events that are included in the company’s summary of consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the carrying amounts of the financial reports and the tax bases of assets and liabilities and are measured by applying the applicable tax rates and laws for the tax years in which these differences are expected to reverse.
Results of Operations
The following should be read in conjunction with the Company’s condensed consolidated financial statements and related notes included elsewhere here. The following table shows, as a percentage of sales, certain operating data that appears in the company’s condensed consolidated income statements:
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