UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form 10-K





(Mark
      One)x
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the fiscal year ended December 31, 2009OR
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from
                  
      to


Commission file number:
000-51430





WOOZYFLY
INC.


(Exact
name of registrant as specified in its charter)





Nevada
            20-3768799(State
      or other jurisdiction of
              incorporation
      or organization)
            (I.R.S.
      Employer Identification No.)244 Fifth Avenue, Suite 1878,New York, NY
            10001(Address
      of principal executive offices)
            (Zip
      Code)





Registrant’s
telephone number, including area code:


(949)
903-0468





Securities
registered pursuant to Section 12(b) of the Act:


Title
      of each class
            Name
      of each exchange on which registeredNone
            None





Securities
registered pursuant to Section 12(g) of the Act:




Common
Stock, par value $0.001 per share







Indicate
by check mark if the registrant is a well-known seasoned issuer as defined in
Rule 405 of the Securities Act.  Yes     No x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes   No x





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes x
     No 





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).Yes 
     No x
















Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.   





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one):


Large
      accelerated filer 
            Accelerated
      filer Non-accelerated
      filer  (Do not check if a smaller reporting company)
            Smaller
      reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Act).  Yes x
     No   





At
January 28, 2010, the there was no aggregate market value of the voting common
stock held by non-affiliates of the Registrant (without admitting that any
person whose shares are not included in such calculation is an affiliate) due to
the lack of trading.  At January 28, 2010, there were 17,610,672
shares of the Registrant’s common stock outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE





None.






























-
2 -








FORWARD-LOOKING
STATEMENTS





This report includes forward-looking statements with-in the
meaning of Section 27A of the Securities Act (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). We have based these statements on our beliefs and assumptions,
based on information currently available to us. These forward-looking statements
are subject to risks and uncertainties. Forward-looking statements include the
information concerning our possible or assumed future results of operations, our
total market opportunity and our business plans and objectives set forth under
the sections entitled "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."





Forward-looking statements are not
guarantees of performance. Our future results and requirements may differ
materially from those described in the forward-looking statements. Many of the
factors that will determine these results and requirements are beyond our
control. In addition to the risks and uncertainties discussed in "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," investors should consider those discussed under "Risk Factors" and,
among others, the following:





Since the sale of substantially all of
our assets, we are a non-operating company and are seeking a suitable
transaction with a private company; however we may not find a suitable candidate
or transaction.  If we are unable to consummate a suitable transaction
we will be forced to liquidate and dissolve, which will take three years to
complete and may result in our distributing less cash to our
stockholders.  Additionally, we will be spending cash during the
winding down of the Company and may not have enough cash to distribute to our
stockholders.





These forward-looking statements speak
only as of the date of this report. We do not intend to update or revise any
forward-looking statements to reflect changes in our business anticipated
results of our operations, strategy or planned capital expenditures, or to
reflect the occurrence of unanticipated events.





PART
I





Item
1.  Description of Business





General





Woozyfly
Inc., and its subsidiary, which are collectively referred to as “Woozyfly,”
“Company,” “we,” “us,” or “our,” unless the context otherwise
requires.  Woozyfly, Inc. was organized September 11, 2003 (Date of
Inception) under the laws of the State of Nevada, as GPP Diversified, Inc.
 The business of the Company was to sell pet products via the Internet.





We were
initially authorized to issue 25,000,000 shares of its no par value common
stock.  On November 9, 2005, we amended its articles of incorporation to
increase its authorized capital to 100,000,000 shares with a par value of
$0.001.  Concurrently, we changed its name from GPP Diversifed, Inc. to Pet
Express Supplies, Inc.





On July
28, 2008, Pet Express Supply, Inc. entered into an Exchange Agreement with each
of the shareholders of CJ Vision Enterprises, Inc., a Delaware corporation doing
business as Woozyfly.com, pursuant to which (i) the Company's shareholder
contributed back to the Company's treasury all but 700,000 issued and
outstanding shares of the Company's common stocks, and (ii) Pet Express Supply,
Inc. purchased from the shareholders of CJ Vision Enterprises, Inc. all issued
and outstanding shares of CJ Vision Enterprises, Inc.’s, common stock, preferred
stock and warrants to purchase CJ Vision Enterprises, Inc. stock, in
consideration for the issuance of 13,410,672 shares of common stock of Pet
Express Supply, Inc. and, to one of the shareholders of CJ Vision Enterprises,
Inc., warrants to purchase 3,776,544 shares of common stock of Pet Express. The
Share Exchange resulted in a change in control of Pet Express Supply, Inc. with
the shareholders of CJ Vision Enterprises, Inc. owning 13,410,672 shares of
common stock of Pet Express Supply, Inc. out of a total of 17,610,672
issued and outstanding shares after giving effect to the Share
Exchange.  Also, the shareholders of CJ Vision Enterprises, Inc. were
elected directors of Pet Express Supply, Inc. and appointed as its executive
officers.  As a result of the Exchange Agreement, (i) CJ Vision
Enterprises, Inc. became a wholly-owned subsidiary of Pet Express Supply, Inc.
and (ii) Pet Express Supply, Inc. succeeded to the business of CJVE as its
sole


-
3 -


business.  Following
the closing of the above transactions, Pet Express Supply, Inc. changed its
corporate name to Woozyfly, Inc. effectuated a 6:1 stock
split.





On
January 15, 2009, we ceased operations.  Since ceasing operations, we
have been seeking to restructure the Company’s capitalization in order to find
suitable candidates for a business combination with a private
company.  We have been unsuccessful in this attempt.  We
have a substantial amount of secured and unsecured debt. Failure to settle this
debt has caused us to petition for bankruptcy protection.





On May
12, 2009, Woozyfly or the “Debtor” filed a voluntary petition in the United
States Bankruptcy Court for the Southern District of New York (the “Bankruptcy
Court”) seeking reorganization relief under the provisions of Chapter 11 of
Title 11 of the United States Code (the “Bankruptcy Code”). The Chapter 11
case is being administered under the caption In re Woozyfly, Inc. Case
No. 09-13022 (JMP) (the “Chapter 11 Case”). The Debtor will continue
to operate its business as debtor in possession under the jurisdiction of the
Bankruptcy Court and in accordance with the applicable provisions of the
Bankruptcy Code and orders of the Bankruptcy Court.





In
connection with the Chapter 11 Case, the Debtor filed a motion seeking
Bankruptcy Court approval of (a) an arrangement pursuant to which the
Debtor has entered into an agreement with MKM Opportunity Master Fund Ltd, as
the lender (the “DIP Loan”).  MKM lent significant monies to the Debtor
prior to the Petition Date, and has agreed to advance $100,000 as a DIP Loan to
the Company, $35,000 of which was already lent to the Debtor in order to enable
it to file the chapter 11 petition.  The Court has approved an initial
disbursement post petition, of $35,000 of the DIP Loan to the Debtor, and the
remaining $30,000 is subject to further Court determination. David Skriloff, the
Company’s former Chairman of the Board is the portfolio manager for Lender.
Lender is also a creditor and stockholder of the Company. Proceeds of the loans
under the DIP Credit Agreement will be used by the Debtor for working capital
and other general corporate purposes of the Debtors and for the costs of
administration of the Chapter 11 Case. The arrangement for the use of the
DIP Loan contains certain financial and other covenants and certain events of
default. On June 16, 2009, the court issued an order granting the motion and
authorized the Debtor to utilize up to $35,000 on an interim basis and possibly
up too $100,000 under the DIP Loan. Concurrent with the filing of Chapter 11,
David Skriloff and Kellis Veach resigned from the Board of
Directors.





The
filing of the Chapter 11 Case constituted an event of default or otherwise
triggered repayment obligations under the Company's 6% Secured Convertible Notes
due June 30, 2011 ("Convertible Notes". As a result, all indebtedness
outstanding under these facilities and the notes became automatically due and
payable, subject to an automatic stay of any action to collect, assert, or
recover a claim against the Company and the application of applicable bankruptcy
law.





On
January 21, 2010, we entered into an Agreement and Plan of Merger (“Merger
Agreement”) with STW Acquisition, Inc. (“Acquisition Sub”), a wholly owned
subsidiary of the Company, STW Resources, Inc. (“Acquiree”) and certain
shareholders of STW controlling a majority of the issued and outstanding shares
of Acquiree.  Pursuant to the Merger Agreement, the Company will be
merged into the Acquisition Sub resulting in an exchange of all of the issued
and outstanding shares of Acquiree for shares of the Company on a one for one
basis. At such time, the Acquiree will become a wholly owned subsidiary of the
Company.  The Merger Agreement is subject to the Bankruptcy Court
confirmation as well as standard closing conditions.





Competition





Our
primary goal is the acquisition of a target company or business seeking the
perceived advantages of being a publicly held corporation. The Company faces
vast competition from other shell companies with the same objectives. The
Company is in a highly competitive market for a small number of business
opportunities which could reduce the likelihood of consummating a successful
business combination. A large number of established and well-financed entities,
including small public companies and venture capital firms, are active in
mergers and acquisitions of companies that may be desirable target candidates
for us. Nearly all these entities have significantly greater financial
resources, technical expertise and managerial capabilities than we do;
consequently, we will be at a competitive disadvantage in identifying possible
business opportunities and successfully completing a business combination. These
competitive factors may reduce the likelihood of our identifying and
consummating a successful business combination.





-
4 -


Patent
and Trademarks





We
currently do not own any patents, trademarks or licenses of any
kind.





Government
Regulations





There are
no government approvals necessary to conduct our current business.





Employees





The
Company currently has no employees.  The Company engages the services of
independent consultants to assist it with management.


-
5 -


Item
1A.  Risk Factors





The following important factors, and
the important factors described elsewhere in this report or in our other filings
with the SEC, could affect (and in some cases have affected) our results and
could cause our results to be materially different from estimates or
expectations.  Other risks and uncertainties may also affect our
results or operations adversely.  The following and these other risks
could materially and adversely affect our business, operations, results or
financial condition.





We
have a history of net losses.





We have a history of incurring losses
from operations. As of December 31, 2009, we had an accumulated deficit of
approximately $4,388,654.  Our existing cash and cash equivalents will
not be sufficient to fund our business needs.  We will rely on funding
from additional financing for our cash needs.  Our ability to continue
may prove more expensive than we currently anticipate and we may incur
significant additional costs and expenses in connection with seeking a suitable
transaction.





Continuing
significant uncertainties and bankruptcy.





We have a substantial amount of secured
and unsecured debt. Failure to settle this debt will cause us to petition for
bankruptcy protection.  If the Company proceeds with this it will need
to await a determination from the Bankruptcy Court as to the outcome of its
petition and the determinations that may be made by the Bankruptcy Court. We can
not predict the out come The Company, its assets, and its operations will remain
subject to the review and oversight of the U.S. Bankruptcy Court (the "Court")
until all obligations to creditors and certain other persons have been
satisfied. On this basis, the Company will be subject to continuing
uncertainties and there can be no assurance the Company will emerge from
bankruptcy without shareholders incurring a significant and irreversible loss on
their investment on the Company's Common Stock.





We
are a non-operating company seeking a suitable transaction and may not find a
suitable candidate or transaction.





We are a non-operating company and are
seeking a suitable transaction with a private company; however, we may not find
a suitable candidate or transaction.  If we are unable to consummate a
suitable transaction we will be forced to liquidate and dissolve which will take
three years to complete and may result in our distributing less cash to our
shareholders.  Additionally, we will be spending cash during the
winding down of the Company and may not have enough cash to distribute to our
shareholders.





We
cannot assure you of the exact amount or timing of any future distribution to
our stockholders.





The precise nature, amount and timing
of any future distribution to our stockholders will depend on and could be
delayed by, among other things, the opportunities for a private company
transaction, administrative and tax filings during or associated with our
seeking a private company transaction or any subsequent dissolution, potential
claim settlements with creditors, and unexpected or greater than expected
operating costs associated with any potential private company transaction or any
subsequent liquidation. Furthermore, we cannot provide any assurances that we
will actually make any distributions.  Any amounts we actually
distribute to our stockholders may be less than the price or prices at which our
common stock has recently traded or may trade in the future.




We
will continue to incur claims, liabilities and expenses that will reduce the
amount available for distribution to stockholders.




Claims,
liabilities and expenses incurred while seeking a private company transaction or
any subsequent dissolution, such as legal, accounting and consulting fees and
miscellaneous office expenses, will reduce the amount of assets available for
future distribution to stockholders. If available cash and amounts received on
the sale of non-cash assets are not adequate to provide for our obligations,
liabilities, expenses and claims, we may not be able to distribute meaningful
cash, or any cash at all, to our stockholders.





-
6 -


We
will continue to incur the expenses of complying with public company reporting
requirements.




We have
an obligation to continue to comply with the applicable reporting requirements
of the Securities Exchange Act of 1934, as amended, even though compliance with
such reporting requirements is economically burdensome.




In
the event of liquidation, our Board of Directors may at any time turn management
of the liquidation over to a third party, and our directors may resign from our
board at that time.




If we are
unable to find or consummate a suitable private company transaction, our
directors may at any time turn our management over to a third party to commence
or complete the liquidation of our remaining assets and distribute the available
proceeds to our stockholders, and our directors may resign from our board at
that time. If management is turned over to a third party and our directors
resign from our board, the third party would have sole control over the
liquidation process, including the sale or distribution of any remaining
assets.




If
we are deemed to be an investment company, we may be subject to substantial
regulation that would cause us to incur additional expenses and reduce the
amount of assets available for distribution.




If we
invest our cash and/or cash equivalents in investment securities, we may be
subject to regulation under the Investment Company Act of 1940. If we are deemed
to be an investment company under the Investment Company Act because of our
investment securities holdings, we must register as an investment company under
the Investment Company Act. As a registered investment company, we would be
subject to the further regulatory oversight of the Division of Investment
Management of the Securities and Exchange Commission, and our activities would
be subject to substantial regulation under the Investment Company Act.
Compliance with these regulations would cause us to incur additional expenses,
which would reduce the amount of assets available for distribution to our
stockholders. To avoid these compliance costs, we intend to invest our cash
proceeds in money market funds and government securities, which are exempt from
the Investment Company Act but which currently provide a very modest
return.




If
we fail to create an adequate contingency reserve for payment of our expenses
and liabilities,  in the event of dissolution, our stockholders could
be held liable for payment to our creditors of each such stockholder’s pro rata
share of amounts owed to the creditors in excess of the contingency reserve, up
to the amount actually distributed to such stockholder.




In the event of dissolution or a
distribution of substantially all our assets, pursuant to the Nevada General
Corporation Law, we will continue to exist for three years after the dissolution
became effective or for such longer period as the Nevada Court of Chancery shall
direct, for the purpose of prosecuting and defending suits against us and
enabling us gradually to close our business, to dispose of our property, to
discharge our liabilities and to distribute to our stockholders any remaining
assets. Under the Nevada General Corporation Law, in the event we fail to create
an adequate contingency reserve for payment of our expenses and liabilities
during this three-year period, each stockholder could be held liable for payment
to our creditors of such stockholder’s pro rata share of amounts owed to
creditors in excess of the contingency reserve, up to the amount actually
distributed to such stockholder.





However, the liability of any
stockholder would be limited to the amounts previously received by such
stockholder from us (and from any liquidating trust or trusts) in the
dissolution. Accordingly, in such event a stockholder could be required to
return all distributions previously made to such stockholder. In such event, a
stockholder could receive nothing from us under the plan of dissolution.
Moreover, in the event a stockholder has paid taxes on amounts previously
received, a repayment of all or a portion of such amount could result in a
stockholder incurring a net tax cost if the stockholder’s repayment of an amount
previously distributed does not cause a commensurate reduction in taxes payable.
There can be no assurance that any contingency reserve established by us will be
adequate to cover any expenses and liabilities.





-
7 -


Our auditors have
expressed a going concern opinion.





Primarily as a result of our recurring
losses and our lack of liquidity, the Company received a report from our
independent auditors that includes an explanatory paragraph describing the
substantial uncertainty as to our ability to continue as a going concern for the
year ended December 31, 2009.





Any
future sale of a substantial number of shares of our common stock could depress
the trading price of our common stock, lower our value and make it more
difficult for us to pursue or consummate a private company
transaction.





Any sale of a substantial number of
shares of our common stock (or the prospect of sales) may have the effect of
depressing the trading price of our common stock. In addition, these sales could
lower our value and make it more difficult for us to engage in a private company
transaction. Further, the timing of the sale of the shares of our common stock
may occur at a time when we would otherwise be able to engage in a private
company transaction on terms more favorable to us.





Our
stock price is likely to be highly volatile because of several factors,
including a limited public float.





The market price of our stock is likely
to be highly volatile because there has been a relatively thin trading market
for our stock, which causes trades of small blocks of stock to have a
significant impact on our stock price. You may not be able to resell our common
stock following periods of volatility because of the market's adverse reaction
to volatility.





Other factors that could cause such
volatility may include, among other things:





·
            announcements
      concerning our strategy;





·
            litigation;
      and





·
            general
      market conditions.





Because
our common stock is considered a "penny stock" any investment in our common
stock is considered to be a high-risk investment and is subject to restrictions
on marketability.





Our common stock is currently traded on
the OTC Bulletin Board and is considered a "penny stock." The OTC Bulletin Board
is generally regarded as a less efficient trading market than the NASDAQ Capital
Market.





The SEC has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks." Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the NASDAQ system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from those rules, to deliver a
standardized risk disclosure document prepared by the SEC, which specifies
information about penny stocks and the nature and significance of risks of the
penny stock market. The broker-dealer also must provide the customer with bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and any salesperson in the transaction, and monthly account statements
indicating the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that, prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the trading
activity in the secondary market for our common stock.





Since our common stock is subject to
the regulations applicable to penny stocks, the market liquidity for our common
stock could be adversely affected because the regulations on penny stocks could
limit the ability of broker-dealers to sell our common stock and thus your
ability to sell our common stock in the secondary market.  There is no
assurance our common stock will be quoted on NASDAQ or the NYSE or listed on any
exchange, even if eligible.





-
8 -


We
have additional securities available for issuance, including preferred stock,
which if issued could adversely affect the rights of the holders of our common
stock.





Our articles of incorporation authorize
the issuance of 100,000,000 shares of common stock.  The common stock
and the preferred stock can be issued by, and the terms of the preferred stock,
including dividend rights, voting rights, liquidation preference and conversion
rights can generally be determined by, our board of directors without
stockholder approval. Any issuance of preferred stock could adversely affect the
rights of the holders of common stock by, among other things, establishing
preferential dividends, liquidation rights or voting powers. Accordingly, our
stockholders will be dependent upon the judgment of our management in connection
with the future issuance and sale of shares of our common stock and preferred
stock, in the event that buyers can be found therefore. Any future issuances of
common stock or preferred stock would further dilute the percentage ownership of
our Company held by the public stockholders.


-
9 -


Item
1B.  Unresolved Staff Comments





None





Item
2.  Properties.





The Company's principal
office is located in New York, New York. The Company shares this address at no
charge to the Company. The Company estimates that it uses approximately 25
square feet of office space at this facility, with the estimated monthly rent
value being approximately $100, which the Company does not deem as
material.





Item
3.  Legal Proceedings.





As
described in more detail elsewhere in this Form 10-K, Woozyfly filed
voluntary petitions under Chapter 11 of the Bankruptcy Code on May 12,
2009.  No assurance can be provided as to what values, if any, will be
ascribed in Woozyfly’s bankruptcy proceedings to the pre-petition liabilities,
common stock and other securities.  Accordingly, caution should be
exercised with respect to existing and future investments in any of these
liabilities or securities.





In order
to successfully exit Chapter 11 bankruptcy, Woozyfly will need to propose, and
obtain confirmation by the Bankruptcy Court of a plan of reorganization that
satisfies the requirements of the Bankruptcy Code.  A plan of
reorganization could, among other things, resolve Woozyfly’s pre-petition
obligations, set forth the revised capital structure of the newly reorganized
entity and provide for corporate governance subsequent to exit from
bankruptcy.  Although Woozyfly expects to file a reorganization plan that
provides for emergence from Chapter 11 bankruptcy sometime in the future, there
can be no assurance that a reorganization plan will be proposed by Woozyfly or
confirmed by the Bankruptcy Court, or that any such plan will be
consummated.





The
Company has incurred and will continue to incur significant costs associated
with the reorganization.  The amount of these costs, which are being
expensed as incurred, are expected to significantly affect the Company’s results
of operations.





Item
4.  Submission of Matters to a Vote of Security Holders.





None





.PART II





Item
5.  Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.





Market
Prices





The
shares of our common stock is listed and principally quoted on the OTC Bulletin
Board under the trading symbol “WZYFQ”





The
following table sets forth, for the fiscal quarters indicated, the high and low
sale price for our common stock, as reported on the OTC Bulletin
Board.





Quarterly
      period
            
            High
            
            
            LowFiscal
      year ended December 31, 2008:Third
      Quarter
            
            $
            5.25
            
            
            $
            0.88Fourth
      Quarter
            
            $
            0.88
            
            
            $
            0.15Fiscal
      year ended December 31, 2009:First
      Quarter
            
            $
            0.15
            
            
            $
            0.15Second
      Quarter
            
            $
            0.15
            
            
            $
            0.15Third
      Quarter
            
            $
            0.15
            
            
            $
            0.15Fourth
      Quarter
            
            $
            0.15
            
            
            $
            0.15


Prior to
the third quarter, our stock was not actively traded.


-
10 -








Holders


As of January 28, 2010, there were
approximately 52 registered holders of record of the Company's Common
Stock.





Dividends


The
Company has not paid any cash dividends to date, and it has no intention of
paying any cash dividends on its common stock in the foreseeable future. The
declaration and payment of dividends is subject to the discretion of the
Company’s Board of Directors and to certain limitations imposed under the Nevada
Statutes. The timing, amount and form of dividends, if any, will depend upon,
among other things, the Company’s results of operation, financial condition,
cash requirements, and other factors deemed relevant by the Board of
Directors.





Securities
Authorized for Issuance under Equity Compensation Plans





The
Company does not have any equity compensation plans or any individual
compensation arrangements with respect to its common stock. The issuance of any
of our common is within the discretion of our Board of Directors, which has the
power to issue any or all of our authorized but unissued shares without
stockholder approval.





Recent
Sale of Unregistered Securities.





On July 28, 2008, we
entered into a Exchange Agreement  with each of the Shareholders of CJ
Vision Enterprises, Inc., a Delaware corporation doing business as Woozyfly,
pursuant to which we purchased from the Shareholders all issued and outstanding
shares of CJVE’s common stock, preferred stock and warrants to purchase CJVE
stock in consideration for the issuance of 13,410,672 shares of common stock of
Pet Express and, to one of the Shareholders, warrants to purchase 3,776,544
shares of common stock of Pet Express (the "Share Exchange").





The Share
Exchange resulted in a change in control of Pet Express with the Shareholders
owning 13,410,672 shares of common stock of Pet Express out of a total of
17,610,672 issued and outstanding shares after giving effect to the Share
Exchange.  Also, the Shareholders were elected directors of Pet
Express and appointed as its executive officers.  As a result of the
Exchange Agreement, (i) CJVE became a wholly-owned subsidiary of Pet Express and
(ii) Pet Express succeeded to the business of CJVE as its sole
business.  Accordingly, Pet Express changed its corporate name to
Woozyfly, Inc.





Additionally,
on July 25, 2008, Woozyfly Inc. entered into a Loan and Security Agreement (the
"Loan Agreement") providing for the issuance to several accredited investors by
Woozyfly Inc. of its 6% Convertible Notes due June 30, 2011 ("Convertible
Notes"). Pursuant to the Loan Agreement, an aggregate principal amount of
$1,400,000 of Convertible Notes have been issued; all but $150,000 in aggregate
principal amount of such Convertible Notes were issued in the third quarter. An
aggregate principal amount of $350,000 of such Convertible Notes were issued
pursuant to the Exchange Agreement dated July 25, 2008 to Corporation
Communication Network, Inc., Lynn Cole Capital, and MKM Opportunity Master Fund,
LP in exchange for convertible notes issued in the same principal amount to such
investors by C J Vision Enterprises, Inc. The entire principal amount under the
Convertible Notes plus all accrued and unpaid interest is due on June 30, 2011.
Interest is payable on the last day of each calendar quarter, commencing
September 30, 2008. Woozyfly Inc. may make interest payments in cash, or at its
option through the reduction of the conversion price discussed
below.





The
Convertible Notes may be converted at a time, at the option of the holder, into
shares of common stock of Woozyfly Inc. at $0.67 per share. The conversion price
is subject to adjustment in event Woozyfly Inc. issues shares (or securities
convertible into shares) at a price that is lower than the then applicable
conversion price.





Woozyfly
Inc. has the right to force conversion of the entire outstanding principal
amount (or a portion thereof), provided, generally that there is then an
effective registration statement in effect with the respect to the shares
issuable upon conversion of the Convertible Notes, the trading price of Woozyfly
Inc.'s common stock is greater than $1.17 and the average daily trading volume
for the preceding 15 trading days exceeds 50,000.


-
11 -





The
Convertible Notes are subject to mandatory prepayment by Woozyfly Inc. in the
event of a financing, and the proceeds of such financing exceed $4,000,000, in
which case all of the proceeds of such financing(s) in excess of $4,000,000 must
be used to prepay the Convertible Notes, with the holders of Convertible Notes
receiving a proportionate share of such proceeds.





In
connection with the issuance of the Convertible Notes, Woozyfly Inc. granted to
the investors five-year warrants to purchase an aggregate of 1,602,066 shares
of common stock of Woozyfly Inc. at $0.75 per share. The warrants contain
cashless exercise provisions that enable the holder to exercise the warrants
without paying additional consideration and to receive a reduced number of
shares in accordance with a formula set forth in the warrant.





Issuer
Purchases of Equity Securities





None





Item 6.  Selected
Financial Data.





As a
“smaller reporting company” as defined by Item 10 of Regulation S-K, the Company
is not required to provide this information.





-
12 -


Item
7.   Management’s Discussion and Analysis of Financial Condition
and Results of Operations.





The following discussion should be
read in conjunction with the Financial Statements and notes
thereto  included in Item 8 of Part II of this Annual Report on Form
10-K.





Overview





We were
organized September 11, 2003 (Date of Inception) under the laws of the State of
Nevada, as GPP Diversified, Inc.  The business of the Company was to sell
pet products via the Internet.





We were
initially authorized to issue 25,000,000 shares of its no par value common
stock.  On November 9, 2005, we amended its articles of incorporation to
increase its authorized capital to 100,000,000 shares with a par value of
$0.001.  Concurrently, we changed its name from GPP Diversifed, Inc. to Pet
Express Supplies, Inc.





On July
28, 2008, Pet Express Supply, Inc. entered into an Exchange Agreement with each
of the shareholders of CJ Vision Enterprises, Inc., a Delaware corporation doing
business as Woozyfly.com, pursuant to which (i) the Company's shareholder
contributed back to the Company's treasury all but 700,000 issued and
outstanding shares of the Company's common stocks, and (ii) Pet Express Supply,
Inc. purchased from the shareholders of CJ Vision Enterprises, Inc. all issued
and outstanding shares of CJ Vision Enterprises, Inc.’s, common stock, preferred
stock and warrants to purchase CJ Vision Enterprises, Inc. stock, in
consideration for the issuance of 13,410,672 shares of common stock of Pet
Express Supply, Inc. and, to one of the shareholders of CJ Vision Enterprises,
Inc., warrants to purchase 3,776,544 shares of common stock of Pet Express. The
Share Exchange resulted in a change in control of Pet Express Supply, Inc. with
the shareholders of CJ Vision Enterprises, Inc. owning 13,410,672 shares of
common stock of Pet Express Supply, Inc. out of a total of 17,610,672
issued and outstanding shares after giving effect to the Share
Exchange.  Also, the shareholders of CJ Vision Enterprises, Inc. were
elected directors of Pet Express Supply, Inc. and appointed as its executive
officers.  As a result of the Exchange Agreement, (i) CJ Vision
Enterprises, Inc. became a wholly-owned subsidiary of Pet Express Supply, Inc.
and (ii) Pet Express Supply, Inc. succeeded to the business of CJVE as its sole
business.  Following the closing of the above transactions, Pet
Express Supply, Inc. changed its corporate name to Woozyfly,
Inc. effectuated a 6:1 stock split.





On
January 15, 2009, we ceased operations.  Since ceasing operations, we
have been seeking to restructure the Company’s capitalization in order to find
suitable candidates for a business combination with a private
company.  We have been unsuccessful in this attempt.  We
have a substantial amount of secured and unsecured debt. Failure to settle this
debt has caused us to petition for bankruptcy protection.





On May
12, 2009, Woozyfly or the “Debtor” filed a voluntary petition in the Bankruptcy
Court seeking reorganization relief under the provisions of Chapter 11 the
Bankruptcy Code. The Chapter 11 case is being administered under the
caption In re Woozyfly, Inc. Case No. 09-13022 (JMP). The Debtor will
continue to operate its business as debtor in possession under the jurisdiction
of the Bankruptcy Court and in accordance with the applicable provisions of the
Bankruptcy Code and orders of the Bankruptcy Court.





In
connection with the Chapter 11 Case, the Debtor filed a motion seeking
Bankruptcy Court approval of (a) an arrangement pursuant to which the
Debtor has entered into DIP Loan.  MKM lent significant monies to the
Debtor prior to the Petition Date, and has agreed to advance $100,000 as a DIP
Loan to the Company, $35,000 of which was already lent to the Debtor in order to
enable it to file the chapter 11 petition.  The Court has approved an
initial disbursement post petition, of $35,000 of the DIP Loan to the Debtor,
and the remaining $30,000 is subject to further Court determination. David
Skriloff, the Company’s former Chairman of the Board is the portfolio manager
for Lender. Lender is also a creditor and stockholder of the Company. Proceeds
of the loans under the DIP Credit Agreement will be used by the Debtor for
working capital and other general corporate purposes of the Debtors and for the
costs of administration of the Chapter 11 Case. The arrangement for the use
of the DIP Loan contains certain financial and other covenants and certain
events of default. On June 16, 2009, the court issued an order granting the
motion and authorized the Debtor to utilize up to $35,000 on an interim basis
and possibly up too $100,000 under the DIP Loan. Concurrent with the filing of
Chapter 11, David Skriloff and Kellis Veach resigned from the Board of
Directors.


-
13 -





The
filing of the Chapter 11 Case constituted an event of default or otherwise
triggered repayment obligations under the Convertible Notes. As a result, all
indebtedness outstanding under these facilities and the notes became
automatically due and payable, subject to an automatic stay of any action to
collect, assert, or recover a claim against the Company and the application of
applicable bankruptcy law.





On
January 21, 2010, we entered into an Agreement and Plan of Merger with STW
Acquisition, Inc., STW Resources, Inc. and certain shareholders of STW
controlling a majority of the issued and outstanding shares of
Acquiree.  Pursuant to the Merger Agreement, the Company will be
merged into the Acquisition Sub resulting in an exchange of all of the issued
and outstanding shares of Acquiree for shares of the Company on  a one
for one basis. At such time, the Acquiree will become a wholly owned subsidiary
of the Company.  The Merger Agreement is subject to the Bankruptcy
Court confirmation as well as standard closing conditions.





Recently Issued Accounting
Pronouncements





Refer to
Note 1 to the financial statements for a complete description of recent
accounting standards which we have not yet been required to implement and may be
applicable to our operation, as well as those significant accounting standards
that have been adopted during 2009.





Critical Accounting
Policies





The preparation of our financial
statements in conformity with accounting principles generally accepted in the
United States of America ("GAAP") requires management to make estimates,
judgments and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of expenses during the reporting
period. On an ongoing basis, we evaluate our estimates which are based on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances. The result of these evaluations forms the
basis for making judgments about the carrying values of assets and liabilities
and the reported amount of expenses that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions. The following accounting policies require significant management
judgments and estimates.





We base
our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. There can be no assurance that
actual results will not differ from these estimates.





Certain
reclassifications have been made to the prior fiscal year amounts disclosed in
the financial statements to conform to the presentation for the fiscal year
ended December 31, 2009. These reclassifications had no effect on the reported
net loss or stockholders’ equity.





Fiscal Year 2009 Compared to
Fiscal Year 2008




Results from
Operations




The
information below represents our historical numbers.  These numbers
are not meaningful going forward due to the sale of all of our business
lines.




Revenues




Revenues
were zero for the years ended December 31, 2009 and 2008,
respectively.




Cost
of Sales




Cost of
sales was zero for the years ended December 31, 2009 and 2008,
respectively.




-
14 -


Selling,
General and Administrative Expenses




Selling,
general and administrative expenses were $214,241 and zero for the years ended
December 31, 2009 and 2008, respectively.




Interest
Income, Expense and Other, Net




Interest
expense and other, net was $41,048 and $46,943 in the years ended December 31,
2009 and 2008, respectively.  The decrease of $5,895 was due to not
taking interest expense on the Convertible Notes after the Petition
Date.




Discontinued
Operations




Loss from
discontinued operations was 82,441 and $2,865,816 in the years ended December
31, 2009 and 2008, respectively.





Bankruptcy





As
described in more detail elsewhere in this Form 10-K, Woozyfly filed
voluntary petitions under Chapter 11 of the Bankruptcy Code on May 12,
2009.  No assurance can be provided as to what values, if any, will be
ascribed in Woozyfly’s bankruptcy proceedings to the pre-petition liabilities,
common stock and other securities.  Accordingly, caution should be
exercised with respect to existing and future investments in any of these
liabilities or securities.





In order
to successfully exit Chapter 11 bankruptcy, Woozyfly will need to propose, and
obtain confirmation by the Bankruptcy Court of a plan of reorganization that
satisfies the requirements of the Bankruptcy Code.  A plan of
reorganization could, among other things, resolve Woozyfly’s pre-petition
obligations, set forth the revised capital structure of the newly reorganized
entity and provide for corporate governance subsequent to exit from
bankruptcy.  Although Woozyfly expects to file a reorganization plan that
provides for emergence from Chapter 11 bankruptcy some time in the future, there
can be no assurance that a reorganization plan will be proposed by Woozyfly or
confirmed by the Bankruptcy Court, or that any such plan will be
consummated.





The
Company has incurred and will continue to incur significant costs associated
with the reorganization.  The amount of these costs, which are being
expensed as incurred, are expected to significantly affect the Company’s results
of operations.




Liquidity and Capital
Resources




Overview
and Outlook





As a
result of our Bankruptcy Filing and the circumstances leading to our Bankruptcy
Filing as described elsewhere in this report, we face uncertainty regarding the
adequacy of our liquidity and capital resources and have limited access to
financing.  The Bankruptcy Filing constituted an event of default under our
pre-petition secured revolving credit facility and the indenture governing our
Notes, and the debt obligations under those agreements became automatically and
immediately due and payable, subject to the automatic stay provisions of
Section 362 of the Bankruptcy Code.





During
the pendency of the Bankruptcy Cases, we expect that our primary sources of
liquidity will be cash flows from borrowings under our DIP Facility.  In
addition to the cash requirements necessary to fund ongoing operations, we have
incurred significant professional fees and other costs in connection with the
Bankruptcy Filing and expect that we will continue to incur significant
professional fees and costs.  We cannot assure you that the amounts of cash
available from operations, together with our DIP Facility, will be sufficient to
fund our operations, including operations during the period until such time as
we are able to propose a plan of reorganization that will receive the requisite
acceptance by creditors and be confirmed by the Bankruptcy Court.  Our
long-term liquidity requirements and the adequacy of our capital resources are
difficult to predict at this time and ultimately cannot be determined until a
plan of reorganization has been developed and is confirmed by the Bankruptcy
Court.


-
15 -





Funds
available under our DIP Facility are expected to be sufficient to fund
operations of our business through the end of 2009.  However, funds
available under our DIP Facility cannot be used for capital expenditures beyond
those permitted in our DIP Facility budget, absent consent from the
post-petition lenders and modification of the DIP Facility
budget.





Sources
of Liquidity





Net cash used in operating activities
was $102,533 and $2,171,321 in the year ended December 31, 2009 and 2008,
respectively.  The decrease of $2,068,788 was due to the cessation of
operations on January 15, 2009 offset by the expenses incurred in the shutting
down of previous activities and preparation for bankruptcy.





Net cash provided by financing
activities was $65,000 and $2,188,777 in the year ended December 31, 2009 and
2008, respectively.  The decrease was due to amounts a fundraising in
consummated in July 2008 offset by amounts borrowed under the DIP Credit
Facility





We suffered recurring losses from
operations and have an accumulated deficit of $4,388,654 at December 31,
2009.  Currently, we are a non-operating public company. We are
seeking out suitable candidates for a business combination with a private
company.  We anticipate that our existing cash and cash equivalents will
not be sufficient to fund our business needs.   Our ability to
continue may prove more expensive than we currently anticipate and we may incur
significant additional costs and expenses in connection with seeking a suitable
transaction. Since the ceasing operations, we have been seeking to restructure
the Company’s capitalization in order to find suitable candidates for a business
combination with a private company.





On January 21, 2010, we entered into an
Agreement and Plan of Merger with STW Acquisition, Inc., STW Resources, Inc. and
certain shareholders of STW controlling a majority of the issued and outstanding
shares of Acquire.  Pursuant to the Merger Agreement, the Company will
be merged into the Acquisition Sub resulting in an exchange of all of the issued
and outstanding shares of Acquiree for shares of the Company on  a one
for one basis. At such time, the Acquiree will become a wholly owned subsidiary
of the Company.  The Merger Agreement is subject to the Bankruptcy
Court confirmation as well as standard closing conditions.





On May
12, 2009, Woozyfly or the “Debtor” filed a voluntary petition in the United
States Bankruptcy Court for the Southern District of New York (the “Bankruptcy
Court”) seeking reorganization relief under the provisions of Chapter 11 of
Title 11 of the United States Code (the “Bankruptcy Code”). The Chapter 11
case is being administered under the caption In re Woozyfly, Inc. Case
No. 09-13022 (JMP) (the “Chapter 11 Case”). The Debtor will continue
to operate its business as debtor in possession under the jurisdiction of the
Bankruptcy Court and in accordance with the applicable provisions of the
Bankruptcy Code and orders of the Bankruptcy Court.





In
connection with the Chapter 11 Case, the Debtor filed a motion seeking
Bankruptcy Court approval of (a) an arrangement pursuant to which the
Debtor has entered into an agreement with MKM Opportunity Master Fund Ltd, as
the lender (the “DIP Loan”).  MKM lent significant monies to the Debtor
prior to the Petition Date, and has agreed to advance $100,000 as a DIP Loan to
the Company, $35,000 of which was already lent to the Debtor in order to enable
it to file the chapter 11 petition.  Lender is also a creditor and
stockholder of the Company. Proceeds of the loans under the DIP Credit Agreement
will be used by the Debtor for working capital and other general corporate
purposes of the Debtors and for the costs of administration of the
Chapter 11 Case. The arrangement for the use of the DIP Loan contains
certain financial and other covenants and certain events of default. The court
issued orders granting the motion and authorized the Debtor to utilize up to
$100,000 under the DIP Loan.





The
filing of the Chapter 11 Case constituted an event of default or otherwise
triggered repayment obligations under the Company's 6% Secured Convertible Notes
due June 30, 2011 ("Convertible Notes". As a result, all indebtedness
outstanding under these facilities and the notes became automatically due and
payable, subject to an automatic stay of any action to collect, assert, or
recover a claim against the Company and the application of applicable bankruptcy
law.





As of
December 31, 2009, the Debtors are in compliance with the terms of the DIP
Facility.


-
16 -





Going Concern
Uncertainties





As of the date of this annual report,
there is doubt regarding our ability to continue as a going concern as we have
not generated sufficient cash flow to fund our business operations and loan
commitments.  Our future success and viability, therefore, are
dependent upon our ability to generate capital financing.  The failure
to generate sufficient revenues or raise additional capital may have a material
and adverse effect upon the Company and our shareholders.





Capital
Expenditures





None




Contractual
Obligations





As a “smaller reporting company” as
defined by Item 10 of Regulation S-K, the Company is not required to provide
this information.





Off-Balance Sheet
Arrangements





As
of December 31, 2009, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.





Item
7A.   Quantitative and Qualitative Disclosures about Market
Risk.





As a “smaller reporting company” as
defined by Item 10 of Regulation S-K, the Company is not required to provide
this information.








-
17 -


Item 8.





WOOZYFLY
INC.








TABLE OF
CONTENTS








PAGEREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            
            19CONSOLIDATED
      FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2009 AND
      2008Consolidated
      Balance Sheets
            
            20Consolidated
      Statements of Operations
            
            21Consolidated
      Statements of Shareholders' Deficit
            
            22Consolidated
      Statements of Cash Flows
            
            23Notes
      to  Consolidated Financial Statements
            
            24
      to 33


























-
18 -





To the
Board of Directors and Stockholders


Woozyfly,
Inc.


New York,
New York








REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





We have
audited the consolidated balance sheet of Woozyfly, Inc. as of December 31, 2009
and 2008 and the related consolidated statements of operations, stockholders’
equity, and cash flows for the years then ended.  Woozyfly, Inc.’s
management is responsible for these financial statements.  Our
responsibility is to express an opinion on these financial statements based on
our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting.  Accordingly, we express no
such opinion.  Our audit of the financial statements includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Woozyfly, Inc. (formerly Pet
Express Supply, Inc.) as of December 31, 2009 and 2008 and the results of its
operations, stockholders’ equity, and cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 12 to the financial
statements, the Company has suffered recurring losses from
operations.  These factors raise substantial doubt about the Company’s
ability to continue as a going concern.  Management’s plans in regard
to these matters are also described in Note 12.  The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

















Weaver
& Martin, LLC


Kansas
City, Missouri


January
28, 2010








-
19 -





Woozyfly
      Inc.Consolidated
      Balance SheetsASSETSDecember
      31,2009
            
            
            2008Current
      assetsCash
      & cash equivalents (held in trust)
            
            $
            309
            
            
            $
            37,842Total
      Current Assets
            
            $
            309
            
            
            $
            37,842LIABILITIES
      AND SHAREHOLDERS' DEFICITCurrent
      liabilitiesDebtor-in-possession
      debt facility
            
            $
            65,000
            
            
            $
            -Accounts
      payable
            
            
            108,450
            
            
            
            -Accrued
      interest
            
            
            3,703
            
            
            
            -Total
      current liabilities
            
            
            177,153
            
            
            
            -Long
      term liabilitiesPre-petition
      liabilities subject to compromise
            
            
            162,624
            
            
            
            76,925Pre-petition
      accrued interest
            
            
            85,465
            
            
            
            48,120Pre-petition
      notes payable
            
            
            1,697,507
            
            
            
            1,697,507Total
      Liabilities
            
            
            2,122,749
            
            
            
            1,822,552Shareholders'
      deficitCommon
      stock, 100,000,000 shares authorized; $0.001 par value;17,610,672
      shares issued and outstanding as of
              December
      31, 2009 and 2008
            
            
            17,610
            
            
            
            17,610Additional
      paid in capital
            
            
            2,248,604
            
            
            
            2,248,604Accumulated
      deficit
            
            
            (4,388,654
            )
            
            
            (4,050,924
            )Total
      shareholders' deficit
            
            
            (2,122,440
            )
            
            
            (1,784,710
            )Total
      liabilities and shareholders' deficit
            
            $
            309
            
            
            $
            37,842The
      accompanying notes are an integral part of these financial
      statements.








-
20 -





Woozyfly
      Inc.Consolidated
      Statements of OperationsFor
      the years ended December 31,2009
            
            
            2008Revenue,
      net
            
            $
            -
            
            
            $
            -Operating
      expensesDirectors
      and officers compensation
            
            
            65,500
            
            
            
            -General
      & administrative expenses
            
            
            148,741
            
            
            
            -Total
      operating expenses
            
            
            214,241
            
            
            
            -Loss
      from operations
            
            
            214,241
            
            
            
            -Other
      expensesInterest
      income / (expense)
            
            
            (41,048
            )
            
            
            (46,943
            )Loss
      from continuing operations
            
            
            (255,289
            )
            
            
            (46,943
            )Loss
      from discontinued operations
            
            
            (82,441
            )
            
            
            (2,865,816
            )Net
      Loss
            
            $
            (337,730
            )
            
            $
            (2,912,759
            )Loss
      per share:Loss
      per share from continuing operation
            
            $
            (0.02
            )
            
            $
            (0.00
            )Loss
      per share from discontinued operations
            
            $
            (0.00
            )
            
            $
            (0.27
            )Basic
      & dilutive loss per share
            
            $
            (0.02
            )
            
            $
            (0.27
            )Basic
      & diluted weighted average shares outstanding
            
            
            17,610,672
            
            
            
            10,616,998The
      accompanying notes are an integral part of these financial
      statements.


-
21 -








Woozyfly
      Inc.Consolidated
      Statements of Shareholders' DeficitFor
      the Years Ended December 31, 2009 and 2008Additional
            
            
            
            
            
            TotalCommon
      Stock
            
            
            Paid-in
            
            
            Accumulated
            
            
            Stockholders'Shares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            EquityBalance,
      December 31, 2007
            
            
            5,455,000
            
            
            $
            5,455
            
            
            $
            48,284
            
            
            $
            (43,418
            )
            
            $
            10,321Shares
      Cancelled
            
            
            (4,755,000
            )
            
            
            (4,755
            )
            
            
            4,755Stock
      Split 6 for 1
            
            
            3,500,000
            
            
            
            3,500
            
            
            
            (3,500
            )Acquisition
      of CJ Vision Enterprises, Inc.
            
            
            13,410,672
            
            
            
            13,410
            
            
            
            2,199,065
            
            
            
            (1,094,747
            )
            
            
            1,117,728Net
      (loss)For
      year endedDecember
      31, 2008
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,912,759
            )
            
            
            (2,912,759
            )Balance,
      December 31, 2008
            
            
            17,610,672
            
            
            
            17,610
            
            
            
            2,248,604
            
            
            
            (4,050,924
            )
            
            
            (1,784,710
            )Net
      (loss)For
      year endedDecember
      31, 2009
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (337,730
            )
            
            
            (337,730
            )Balance,
      December 31, 2009
            
            
            17,610,672
            
            
            $
            17,610
            
            
            $
            2,248,604
            
            
            $
            (4,388,654
            )
            
            $
            (2,122,440
            )The
      accompanying notes are an integral part of these financial
      statements.


-
22 -





Woozyfly
      Inc.Consolidated
      Statements of Cash FlowsFor
      the Years Ended December 31, 2009 and 2008For
      the Year EndedDecember
      31,2009
            
            
            2008Cash
      flows from operating activitiesLoss
      from continuing operations
            
            $
            (255,289
            )
            
            $
            -Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Pre-petition
      accrued interest
            
            
            37,345
            
            
            
            -Pre-petition
      accounts payable
            
            
            40,010
            
            
            
            -Changes
      in operating assets and liabilities:Accrued
      interest
            
            
            3,703
            
            
            
            -Accounts
      payable
            
            
            108,450
            
            
            
            -Net
      cash used in operating activities from continuing
    operations
            
            
            (65,781
            )Net
      cash used in operating activities from discontinued
    operations
            
            
            (36,752
            )
            
            
            (2,171,321
            )Net
      cash used in operating activities
            
            
            (102,533
            )
            
            
            (2,171,321
            )Cash
      flows from investing activitiesPurchase
      of fixed assets
            
            
            -
            
            
            
            -Net
      cash used in investing activities
            
            
            -
            
            
            
            -Cash
      flows from financing activitiesProceeds
      from notes payable
            
            
            65,000
            
            
            
            2,188,777Proceeds
      from sale of common stock
            
            
            -
            
            
            
            -Net
      cash provided from financing activities
            
            
            65,000
            
            
            
            2,188,777Net
      increase(decrease) in cash
            
            
            (37,533
            )
            
            
            17,456Cash
      - beginning
            
            
            37,842
            
            
            
            20,386Cash
      - ending
            
            $
            309
            
            
            $
            37,842Supplemental
      disclosures:Interest
      paid
            
            $
            -
            
            
            $
            -Income
      taxes paid
            
            $
            -
            
            
            $
            -








The
accompanying notes are an integral part of these financial
statements


-
23 -


WOOZYFLY
INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


YEARS
ENDED DECEMBER 31, 2009 AND 2008





NOTE
1.    Nature of business and significant accounting
policies





Current
Operations and Background— We were organized September 11, 2003
(Date of Inception) under the laws of the State of Nevada, as GPP Diversified,
Inc.  The business of the Company was to sell pet products via the
Internet.





We were
initially authorized to issue 25,000,000 shares of its no par value common
stock.  On November 9, 2005, we amended its articles of incorporation to
increase its authorized capital to 100,000,000 shares with a par value of
$0.001.  Concurrently, we changed its name from GPP Diversifed, Inc. to Pet
Express Supplies, Inc.





On July
28, 2008, Pet Express Supply, Inc. entered into an Exchange Agreement with each
of the shareholders of CJ Vision Enterprises, Inc., a Delaware corporation doing
business as Woozyfly.com, pursuant to which (i) the Company's shareholder
contributed back to the Company's treasury all but 700,000 issued and
outstanding shares of the Company's common stocks, and (ii) Pet Express Supply,
Inc. purchased from the shareholders of CJ Vision Enterprises, Inc. all issued
and outstanding shares of CJ Vision Enterprises, Inc.’s, common stock, preferred
stock and warrants to purchase CJ Vision Enterprises, Inc. stock, in
consideration for the issuance of 13,410,672 shares of common stock of Pet
Express Supply, Inc. and, to one of the shareholders of CJ Vision Enterprises,
Inc., warrants to purchase 3,776,544 shares of common stock of Pet Express. The
Share Exchange resulted in a change in control of Pet Express Supply, Inc. with
the shareholders of CJ Vision Enterprises, Inc. owning 13,410,672 shares of
common stock of Pet Express Supply, Inc. out of a total of 17,610,672
issued and outstanding shares after giving effect to the Share
Exchange.  Also, the shareholders of CJ Vision Enterprises, Inc. were
elected directors of Pet Express Supply, Inc. and appointed as its executive
officers.  As a result of the Exchange Agreement, (i) CJ Vision
Enterprises, Inc. became a wholly-owned subsidiary of Pet Express Supply, Inc.
and (ii) Pet Express Supply, Inc. succeeded to the business of CJVE as its sole
business.  Following the closing of the above transactions, Pet
Express Supply, Inc. changed its corporate name to Woozyfly,
Inc. effectuated a 6:1 stock split.





On
January 15, 2009, we ceased operations.  Since ceasing operations, we
have been seeking to restructure the Company’s capitalization in order to find
suitable candidates for a business combination with a private
company.  We have been unsuccessful in this attempt.  We
have a substantial amount of secured and unsecured debt. Failure to settle this
debt has caused us to petition for bankruptcy protection.





On May
12, 2009, Woozyfly or the “Debtor” filed a voluntary petition in the Bankruptcy
Court seeking reorganization relief under the provisions of Chapter 11 the
Bankruptcy Code. The Chapter 11 case is being administered under the
caption In re Woozyfly, Inc. Case No. 09-13022 (JMP). The Debtor will
continue to operate its business as debtor in possession under the jurisdiction
of the Bankruptcy Court and in accordance with the applicable provisions of the
Bankruptcy Code and orders of the Bankruptcy Court.





In
connection with the Chapter 11 Case, the Debtor filed a motion seeking
Bankruptcy Court approval of (a) an arrangement pursuant to which the
Debtor has entered into DIP Loan.  MKM lent significant monies to the
Debtor prior to the Petition Date, and has agreed to advance $100,000 as a DIP
Loan to the Company, $35,000 of which was already lent to the Debtor in order to
enable it to file the chapter 11 petition.  The Court has approved an
initial disbursement post petition, of $35,000 of the DIP Loan to the Debtor,
and the remaining $30,000 is subject to further Court determination. David
Skriloff, the Company’s former Chairman of the Board is the portfolio manager
for Lender. Lender is also a creditor and stockholder of the Company. Proceeds
of the loans under the DIP Credit Agreement will be used by the Debtor for
working capital and other general corporate purposes of the Debtors and for the
costs of administration of the Chapter 11 Case. The arrangement for the use
of the DIP Loan contains certain financial and other covenants and certain
events of default. On June 16, 2009, the court issued an order granting the
motion and authorized the Debtor to utilize up to $35,000 on an interim basis
and possibly up too $100,000 under the DIP Loan. Concurrent with the filing of
Chapter 11, David Skriloff and Kellis Veach resigned from the Board of
Directors.


-
24 -





The
filing of the Chapter 11 Case constituted an event of default or otherwise
triggered repayment obligations under the Convertible Notes. As a result, all
indebtedness outstanding under these facilities and the notes became
automatically due and payable, subject to an automatic stay of any action to
collect, assert, or recover a claim against the Company and the application of
applicable bankruptcy law.





On January 21, 2010, we entered into an
Agreement and Plan of Merger with STW Acquisition, Inc., STW Resources, Inc. and
certain shareholders of STW controlling a majority of the issued and outstanding
shares of Acquiree.  Pursuant to the Merger Agreement, the Company
will be merged into the Acquisition Sub resulting in an exchange of all of the
issued and outstanding shares of Acquiree for shares of the Company
on  a one for one basis. At such time, the Acquiree will become a
wholly owned subsidiary of the Company.  The Merger Agreement is
subject to the Bankruptcy Court confirmation as well as standard closing
conditions.





Basis of
Presentation— The accompanying financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
of America.





Use of
Estimates —The preparation of financial statements in conformity with
generally accepted accounting principles in the United States of America
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 financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.





Cash and Cash
Equivalents (Held in Trust)— The Company considers investments with
original maturities of 90 days or less to be cash equivalents.





Income
Taxes- The
Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC
740-10-25”).  Under ASC 740-10-25, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases.  Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.  Under ASC 740-10-25, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.





Net Loss Per
Share — Basic loss per share is calculated using the weighted-average
number of common shares outstanding during each reporting period. Diluted loss
per share includes potentially dilutive securities such as outstanding options
and warrants, using various methods such as the treasury stock or modified
treasury stock method in the determination of dilutive shares outstanding during
each reporting period.  The Company currently has no dilutive
securities and as such, basic and diluted loss per share are the same for all
periods presented.





Net Loss Per
Share — The Company computes net loss per share in accordance with SFAS
No. 128, “Earnings per Share,” and Securities and Exchange Commission (“SEC”)
Staff Accounting Bulletin No. 98 (“SAB 98”). Under the provisions of SFAS No.
128 and SAB 98, basic and diluted net loss per share is computed by dividing the
net loss available to common stockholders for the period by the weighted average
number of shares of common stock outstanding during the period.  Common
equivalent shares related to stock options and warrants have been excluded from
the computation of basic and diluted earnings per share, for the years ended
December 31, 2009 and 2008 because their effect is anti-dilutive.





Concentration of
Credit Risk — Financial instruments that potentially subject the Company
to a concentration of credit risk consist of cash.  The Company
maintains its cash with high credit quality financial institutions; at times,
such balances with any one financial institution may exceed FDIC insured
limits.





Financial
Instruments — Our financial instruments consist of cash, accounts
payable, and notes payable.  The carrying values of cash, accounts
payable, and notes payable are representative of their fair values due to their
short-term maturities.


-
25 -





Fair Value
Measurements and Disclosures - ASC Topic 820 defines fair
value, establishes a framework for measuring fair value, establishes a
three-level valuation hierarchy for disclosure of fair value measurement and
enhances disclosure requirements for fair value measurements. The valuation
hierarchy is based upon the transparency of inputs to the valuation of an asset
or liability as of the measurement date. The three levels are defined as
follows:





Level 1
- Inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets.





Level 2
- Inputs to the valuation methodology include quoted prices for similar assets
and liabilities in active markets, and inputs that are observable for the asset
or liability, either directly or indirectly, for substantially the full term of
the financial instrument.





Level 3
- Inputs to the valuation methodology are unobservable and significant to the
fair value measurement.





The
Company’s adoption of fair value measurements and disclosures did not have a
material impact on the financial statements and financial statement
disclosures.





Recently Issued
Accounting Pronouncements—


In
June 2009, the FASB issued ASC 105 Accounting Standards
Codification TMand the
Hierarchy of Generally Accepted Accounting Principles. The FASB
Accounting Standards Codification TM (the “Codification”) has become the source
of authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
accordance with Generally Accepted Accounting Principles (“GAAP”). All existing
accounting standard documents are superseded by the Codification and any
accounting literature not included in the Codification will not be
authoritative. Rules and interpretive releases of the SEC issued under the
authority of federal securities laws, however, will continue to be the source of
authoritative generally accepted accounting principles for SEC registrants.
Effective September 30, 2009, all references made to GAAP in our
consolidated financial statements will include references to the new
Codification. The Codification does not change or alter existing GAAP and,
therefore, will not have an impact on our financial position, results of
operations or cash flows.





In June
2009, the FASB issued changes to the consolidation guidance applicable to a
variable interest entity (VIE). FASB ASC Topic 810, "Consolidation," amends the
guidance governing the determination of whether an enterprise is the primary
beneficiary of a VIE, and is, therefore, required to consolidate an entity, by
requiring a qualitative analysis rather than a quantitative analysis. The
qualitative analysis will include, among other things, consideration of who has
the power to direct the activities of the entity that most significantly impact
the entity's economic performance and who has the obligation to absorb losses or
the right to receive benefits of the VIE that could potentially be significant
to the VIE. This standard also requires continuous reassessments of whether an
enterprise is the primary beneficiary of a VIE. FASB ASC 810 also requires
enhanced disclosures about an enterprise's involvement with a VIE. Topic 810 is
effective as of the beginning of interim and annual reporting periods that begin
after November 15, 2009. This will not have an impact on the Company’s financial
position, results of operations or cash flows.





In June
2009, the FASB issued Financial Accounting Standards Codification No. 860 -
Transfers and Servicing. FASB ASC No. 860 improves the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial position, financial
performance, and cash flows; and a transferor's continuing involvement, if any,
in transferred financial assets. FASB ASC No. 860 is effective as of the
beginning of each reporting entity's first annual reporting period that begins
after November 15, 2009, for interim periods within that first annual reporting
period and for interim and annual reporting periods thereafter. The Company is
evaluating the impact the adoption of FASB ASC No. 860 will have on its
financial statements.





-
26 -


NOTE 2 - Notes
Payable





Pre-petition
Debt





Convertible
Notes





On July
25, 2008, Woozyfly, Inc. entered into a Loan and Security Agreement (the "Loan
Agreement") providing for the issuance to several accredited investors by
Woozyfly, Inc. of its 6% Convertible Notes due June 30, 2011 ("Convertible
Notes"). Pursuant to the Loan Agreement an aggregate principal amount of
$1,400,000 of Convertible Notes have been issued; all but $150,000 in aggregate
principal amount of such Convertible Notes were issued in the third quarter. An
aggregate principal amount of $350,000 of such Convertible Notes were issued
pursuant to the Exchange Agreement dated July 25, 2008 to Corporation
Communication Network, Inc., Lynn Cole Capital, and MKM Opportunity Master Fund,
LP in exchange for convertible notes issued in the same principal amount to such
investors by C J Vision Enterprises, Inc. The entire principal amount under the
Convertible Notes plus all accrued and unpaid interest is due on June 30, 2011.
Interest is payable on the last day of each calendar quarter, commencing
September 30, 2008. Woozyfly, Inc. may make interest payments in cash, or at its
option through the reduction of the conversion price discussed
below.





The
Convertible Notes may be converted at a time, at the option of the holder, into
shares of common stock of Woozyfly, Inc. at $0.67 per share. The conversion
price is subject to adjustment in event Woozyfly, Inc. issues shares (or
securities convertible into shares) at a price that is lower than the then
applicable conversion price.





Woozyfly,
Inc. has the right to force conversion of the entire outstanding principal
amount (or a portion thereof), provided, generally that there is then an
effective registration statement in effect with the respect to the shares
issuable upon conversion of the Convertible Notes, the trading price of
Woozyfly, Inc.'s common stock is greater than $1.17 and the average daily
trading volume for the preceding 15 trading days exceeds 50,000.





The
Convertible Notes are subject to mandatory prepayment by Woozyfly, Inc. in the
event of a financing, and the proceeds of such financing exceed $4,000,000, in
which case all of the proceeds of such financing(s) in excess of $4,000,000 must
be used to prepay the Convertible Notes, with the holders of Convertible Notes
receiving a proportionate share of such proceeds.





In
connection with the issuance of the Convertible Notes, Woozyfly, Inc. granted to
the investors five-year warrants to purchase an aggregate of 1,602,066 shares
of common stock of Woozyfly, Inc. at $0.75 per share. We valued these
warrants at zero.  The warrants contain cashless exercise provisions
that enable the holder to exercise the warrants without paying additional
consideration and to receive a reduced number of shares in accordance with a
formula set forth in the warrant.





Exchange
Notes





Pursuant
to the Exchange Agreement, Woozyfly, Inc. issued to two accredited investors
(assignees of Peter Newman) an aggregate principal amount of $297,504.00 of 6%
Promissory Notes due June 30, 2009 ("Exchange Notes") in exchange for a
convertible note issued to Peter Newman in the same principal amount by C J
Vision Enterprises, Inc. The principal and accrued interest are payable on the
maturity date, June 30, 2009.





One of
the Exchange Notes, in an aggregate principal amount of $36,000, is subject to
mandatory prepayment by Woozyfly, Inc. when at least. $800,000 has been raised
by Woozyfly, Inc. in connection with the issuance of Convertible Notes pursuant
to the Loan Agreement (the "Funding"). That condition has been met, and
consequently, such Exchange Note is immediately prepayable.





The other
Exchange Note, in an aggregate principal amount of $261,504, is subject to
mandatory prepayment by Woozyfly, Inc. as follows: (i) if more than $2,000,000
is raised in the Funding, 50% of the aggregate amount of the Funding that was
not introduced by MKM Capital, any present or former affiliate of MKM or its
principals, or any officer or director of Woozyfly, Inc., shall be applied to
prepayment of such Exchange Note, up to a maximum prepayment amount equal to the
excess of the total amount raised in the Funding over $2,000,000; and (ii) the
balance of unpaid principal and interest is mandatorily prepayable from the
first amounts in excess of $3,000,000 raised in the Funding or in any subsequent
financing by Woozyfly, Inc.





-
27 -





The
Convertible Notes and the Exchange Notes rank senior to all current and future
indebtedness of Woozyfly, Inc. and are secured by substantially all of the
assets of Woozyfly, Inc.





The
filing of the Chapter 11 Case constituted an event of default or otherwise
triggered repayment obligations under the Company's 6% Secured Convertible Notes
due June 30, 2011 ("Convertible Notes". As a result, all indebtedness
outstanding under these facilities and the notes became automatically due and
payable, subject to an automatic stay of any action to collect, assert, or
recover a claim against the Company and the application of applicable bankruptcy
law.





Interest
expense in 2009 includes interest on our pre-petition Convertible Notes and
Exchange Notes up to the date of our bankruptcy filing and interest on our
post-petition DIP Facility.  Because we do not believe that interest on our
Convertible Notes and Exchange Notes will be allowed as a claim past the
Petition Date, we discontinued recognizing interest expense on our Notes as of
that date.   Contractual interest amounts disclosed in our Condensed
Consolidated Statement of Operations reflects the cost of borrowings without
regard to what the Bankruptcy Court may allow as a claim.





Debtor-in-possession Debt
Facility





In
connection with the Chapter 11 Case, the Debtor filed a motion seeking
Bankruptcy Court approval of (a) an arrangement pursuant to which the
Debtor has entered into an agreement with MKM Opportunity Master Fund Ltd, as
the lender (the “DIP Loan”).  MKM lent significant monies to the Debtor
prior to the Petition Date, and has agreed to advance $100,000 as a DIP Loan to
the Company, $35,000 of which was already lent to the Debtor in order to enable
it to file the chapter 11 petition.  The Court has approved an initial
disbursement post petition, of $35,000 of the DIP Loan to the Debtor, and the
remaining $30,000 is subject to further Court determination. David Skriloff, the
Company’s Chairman of the Board is the portfolio manager for Lender. Lender is
also a creditor and stockholder of the Company. Proceeds of the loans under the
DIP Credit Agreement will be used by the Debtor for working capital and other
general corporate purposes of the Debtors and for the costs of administration of
the Chapter 11 Case. The arrangement for the use of the DIP Loan contains
certain financial and other covenants and certain events of default. On June16,
2009, the court issued an order granting the motion and authorized the Debtor to
utilize up to $35,000 on an interim basis and possibly up too $100,000 under the
DIP Loan. As of December 31, 2009, MKM has lent us $65,000 under the DIP
Loan.





NOTE
3 – Related-party transactions





None





NOTE
4 – Equity





On July
28, 2008, Pet Express Supply, Inc. entered into an Exchange Agreement (the
“Exchange Agreement”) with each of the shareholders of CJ Vision Enterprises,
Inc., a Delaware corporation doing business as Woozyfly.com ("CJVE"), pursuant
to which (i) the stockholders of Pet Express Supply, Inc. contributed back to
the Company’s Treasury all but 4,200,000 of the issued and outstanding
shares of common stock of Pet Express Supply, Inc., and (ii) Pet Express Supply,
Inc. purchased from the shareholders of CJ Vision Enterprises, Inc. all issued
and outstanding shares of CJ Vision Enterprises, Inc.’s, common stock, preferred
stock and warrants to purchase CJ Vision Enterprises, Inc. stock, in
consideration for the issuance of 13,410,672 shares of common stock of Pet
Express Supply, Inc. and, to one of the shareholders of CJ Vision Enterprises,
Inc., warrants to purchase 3,776,544 shares of common stock of Pet Express
(the "Share Exchange") We valued these warrants at
zero.  .





The Share
Exchange resulted in a change in control of Pet Express Supply, Inc. with the
shareholders of CJ Vision Enterprises, Inc. owning 13,410,672 shares of common
stock of Pet Express Supply, Inc. out of a total of 17,610,672 issued and
outstanding shares after giving effect to the Share Exchange.  Also,
the directors of CJ Vision Enterprises, Inc. were elected directors of Pet
Express Supply, Inc. and the officers of CJVE appointed as the
Company's executive officers.  As a result of the Exchange
Agreement, (i) CJ Vision Enterprises, Inc. became a wholly-owned subsidiary of
Pet Express Supply, Inc. and (ii) Pet Express Supply, Inc. succeeded to the
business of CJVE as its sole business.


-
28 -





Pursuant
to the Exchange Agreement, the Shareholders transferred all of their CJVE shares
and warrants to purchase shares to Pet Express in consideration of the issuance
of 13,410,672 shares of common stock Pet express to the Shareholders. One
of the Shareholders also exchanged its warrants to purchase CJVE stock for
warrants to purchase 3,776,544 shares of Pet Express common stock at $0.01 per
share. The common stock was issued as follows:





Name
            
            Number of
              SharesVision
      Opportunity Master Fund Ltd.
            
            
            1,743,456DigitalFX
      International, Inc.
            
            
            5,520,000WF
      Holdings, LLC
            
            
            2,430,000Bleecker
      Holdings, Inc.
            
            
            2,430,000Others
            
            
            1,287,216Total
            
            
            13,410,672





NOTE
5 - Warrants





We have
5,378,610 warrants issued and outstanding at December 31, 2009.The following
summarizes pricing and term information for warrants issued to investors which
are outstanding as of December 31, 2009:





Options
      Outstanding
            
            Options
      ExercisableRange
      of Exercise Prices
            
            Number
      Outstanding at December 31, 2009
            
            Weighted
      Average Remaining Contractual
              Life
            
            Weighted
      Average Exercise Price
            
            Number
      Exercisable at December 31, 2009
            
            Weighted
      Average Exercise Price$0.01
            
            
            3,776,544
            
            
            3.50
            
            
            $0.01
            
            
            3,776,544
            
            
            $0.01$0.75
            
            
            1,602,066
            
            
            3.50
            
            
            $0.75
            
            
            1,602,066
            
            
            $0.75





NOTE
6 – Stock Options





We have
issued non-plan options to various employees, directors and
consults.   The Board of directors administers the options grants,
selects the individuals to whom options will be granted, determines the number
of options to be granted, and the term and exercise price of each
option.





The
Company has elected to adopt the detailed method provided in SFAS No. 123(R) for
calculating the beginning balance of the additional paid-in capital pool (“APIC
pool”) related to the tax effects of employee stock-based compensation, and to
determine the subsequent impact on the APIC pool and Consolidated Statements of
Cash Flows of the income tax effects of employee stock-based compensation awards
that are outstanding upon the adoption of SFAS No. 123(R).





The fair
value of each stock option granted is estimated on the date of the grant using
the Black-Scholes option pricing model.  The Black-Scholes option
pricing model has assumptions for risk free interest rates, dividends, stock
volatility and expected life of an option grant.  The risk free
interest rate is based upon market yields for United States Treasury debt
securities at a 7-year constant maturity.  Dividend rates are based on
the Company’s dividend history.  The stock volatility factor is based
on the last 60 days of market prices prior to the grant date.  The
expected life of an option grant is based on management’s
estimate.  The fair value of each option grant, as calculated by the
Black-Scholes method, is recognized as compensation expense on a straight-line
basis over the vesting period of each stock option award.  Based on
the valuation of these options we did not record any share based compensation
expense.


-
29 -





The
following summarizes pricing and term information for options issued to
employees and directors which are outstanding as of December 31,
2009:





Options
      Outstanding
            
            Options
      ExercisableRange
      of Exercise Prices
            
            Number
      Outstanding at December 31, 2009
            
            Weighted
      Average Remaining Contractual
              Life
            
            Weighted
      Average Exercise Price
            
            Number
      Exercisable at December 31, 2008
            
            Weighted
      Average Exercise Price$0.67
            
            
            606,000
            
            
            3.75
            
            
            $0.67
            
            
            606,000
            
            
            $0.67





During
the quarter ended December 31, 2009, the Company we issued no options.  We
have 606,000 options issued and outstanding at December 31, 2009.





Balance
      at December 31, 2007
            
            
            -Issued
            
            
            4,177,002Expired
            
            
            3,571,002Balance
      at December 31, 2008
            
            
            606,000Issued
            
            
            -Expired
            
            
            -Balance
      at December 31, 2009
            
            
            606,000





NOTE
7 – Earnings per Share





The following table sets forth common
stock equivalents (potential common stock) for the years ended December 31, 2009
and 2008 that are not included in the loss per share calculation above because
their effect would be anti-dilutive for the periods indicated:





Year
      Ended December 31,2009
            
            
            2008Weighted
      average common stock equivalents:Non-Plan
      Stock Options
            
            
            606,000
            
            
            
            606,000Warrants
            
            
            5,378,610
            
            
            
            5,378,610





NOTE
8 – Commitments and Contingencies





Leases—The Company currently is not party to any leases





Rent expense charged to operations for
the years ended December 31, 2009 and 2008 was zero and $101,225.





Litigation— The Company is currently not party to any legal proceedings besides the
previously described bankruptcy.





Consulting
Agreements—On January 7, 2009, we entered into an agreement with Venor,
Inc. to provide consulting services on a month to month basis.   Eric
Stoppenhagen, a principle of Venor, Inc., will provide executive financial
services to the Company.  Venor, Inc. will be paid $15,000 the first
month, $10,000 the second month, $7,500 the third month, $5,000 the fourth
month, and $3,500 every month thereafter.


-
30 -





NOTE
9 – Concentration of Credit Risk





We
maintain our cash balances in various financial institutions that from time to
time exceed amounts insured by the Federal Deposit Insurance Corporation up to
$250,000, per financial institution.  As of December 31, 2009, our deposits
did not exceed insured amounts.  We have not experienced any losses in
such accounts and believe we are not exposed to any significant credit risk on
cash.





NOTE
10 – Reorganization Items





ASC Topic
852 requires separate disclosure of reorganization items such as realized gains
and losses from the settlement of pre-petition liabilities, provisions for
losses resulting from the reorganization and restructuring of the business, as
well as professional fees directly related to the process of reorganizing the
Debtors under Chapter 11.  The Debtors’ reorganization items for the year
ended December 31, 2009 consist of the following:





2009Provision
      for rejected executory contracts and leases
            
            $
            -Professional
      fees directly related to reorganization (a)
            
            194,974Other
      (b)
            
            975Total
      reorganization items
            
            $
            194,974







(a)          
      Professional fees directly related to the reorganization include
      post—petition fees associated with advisors to the Debtors, the statutory
      committee of unsecured creditors and certain secured creditors.
      Professional fees are estimated by the Debtors and will be reconciled to
      actual invoices when received.





(b)          
      Represents United States Trustee
Fees








NOTE
11 – PRE-PETITION LIABILITIES SUBJECT TO COMPROMISE





Pre-petition
liabilities subject to compromise refers to unsecured obligations that will be
accounted for under a plan of reorganization.  Generally, actions to
enforce or otherwise effect payment of pre-Chapter 11 liabilities are
stayed.  ASC Topic 852 requires pre-petition liabilities that are subject
to compromise to be reported at the amounts expected to be allowed, even if they
may be settled for lesser amounts.  These liabilities represent the
estimated amount expected to be allowed on known or potential claims to be
resolved through the Chapter 11 process, and remain subject to future
adjustments arising from negotiated settlements, actions of the Bankruptcy
Court, rejection of executory contracts and unexpired leases, the determination
as to the value of any potential collateral securing the claims, proofs of
claim, or other events.  Pre-petition liabilities subject to compromise
also include certain items that may be assumed under the plan of reorganization,
and as such, may be subsequently reclassified to liabilities not subject to
compromise.  At hearings held in June 2009, the Court granted final
approval of many of the Debtors’ First Day Motions covering, among other things,
insurance, business operations, certain tax matters, cash management, utilities,
case management and retention of professionals.  Obligations associated
with these matters are not classified as pre-petition liabilities subject to
compromise.





In
accordance with ASC Topic 852, debt issuance costs associated with borrowing
classified as pre-petition liabilities subject to compromise should be viewed as
valuation adjustments to the related debt.  When the debt has become an
allowed claim and the allowed claim differs from the net carrying amount of the
debt, the recorded amount should be adjusted to the amount of the allowed claim
(thereby adjusting existing debt issuance costs to the extent necessary to
report the debt at this allowed amount).  Through September 30, 2009, the
Bankruptcy Court had not classified any of the Debtors’ outstanding debt as
allowed claims. Therefore, the Company has classified the Debtors’ Notes as
“pre-petition liabilities subject to compromise” on the Condensed
Consolidated Balance Sheet.  The Company may be required to expense these
amounts or a portion thereof upon determination of the allowed claim by the
Bankruptcy Court.


-
31 -





The
Debtors may reject certain pre-petition executory contracts and unexpired leases
with respect to the Debtors’ operations with the approval of the Bankruptcy
Court and may reject additional agreements in the future.  Damages
resulting from rejection of executory contracts and unexpired leases are
generally treated as general unsecured claims and will be classified as
“pre-petition liabilities subject to compromise”.  Holders of pre-petition
claims (excluding governmental claims) are required to file proofs of claims by
the “general bar date”, which is September 8, 2009.  A bar date is the
date by which certain claims against the Debtors must be filed if the claimants
wish to receive any distribution in the Chapter 11 cases.  Creditors have
been notified of the general bar date and the requirement to file a proof of
claim with the Bankruptcy Court.  Differences between liability amounts
estimated by the Debtors and claims filed by creditors will be investigated and,
if necessary, the Bankruptcy Court will make a final determination of the
allowable claim.  The determination of how liabilities will ultimately be
treated cannot be made until the Bankruptcy Court approves a Chapter 11 plan of
reorganization.  Accordingly, the ultimate amount or treatment of such
liabilities is not determinable at this time.





Pre-petition
liabilities subject to compromise consist of the following:





December
      31,
              2009Secured
      notes payable
            
            $
            1,697,507Pre-petition
      accounts payable
            
            162,624Accrued
      interest on Notes
            
            85,465Total
      pre-petition liabilities subject to compromise
            
            $
            1,945,596





Pre-petition
liabilities subject to compromise include trade accounts payable related to
pre-petition purchases.  As a result, the Company’s cash flows from
operations were favorably affected by the stay of payment related to these
accounts payable.  Accrued interest represents amounts due on the Notes as
of the Petition Date.  No interest has been accrued on the Notes subsequent
to the Petition Date because such amounts are not expected to become part of an
allowed claim.




NOTE
12 - Going Concern





The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
company as a going concern. However, we have an accumulated deficit of
$4,388,654 as of December 31, 2009. Our total liabilities exceeded its total
assets by $2,122,439 as of December 31, 2009. In view of the matters described
above, recoverability of a major portion of the recorded asset amounts shown in
the accompanying balance sheet is dependent upon our continued operations, which
in turn is dependent upon our ability to raise additional capital, obtain
financing and succeed in seeking out suitable candidates for a business
combination with a private company. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might be necessary
should we be unable to continue as a going concern.





Furthermore,
to the extent we are unable to negotiate a substantial portion of our debt, we
will need to file a petition for bankruptcy or will not be able to
continue.





-
32 -


NOTE
13 – Subsequent Events





In
preparing these financial statements, the Company has evaluated events and
transactions for potential recognition or disclosure through January 29, 2010,
the date the financial statements were issued.





On January 21, 2010, we entered into an
Agreement and Plan of Merger with STW Acquisition, Inc., STW Resources, Inc. and
certain shareholders of STW controlling a majority of the issued and outstanding
shares of Acquire.  Pursuant to the Merger Agreement, the Company will
be merged into the Acquisition Sub resulting in an exchange of all of the issued
and outstanding shares of Acquiree for shares of the Company on  a one
for one basis. At such time, the Acquiree will become a wholly owned subsidiary
of the Company.  The Merger Agreement is subject to the Bankruptcy
Court confirmation as well as standard closing conditions.








-
33 -







Item
9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.





Not
applicable





Item
9A(T).  Controls and Procedures.





(a) Evaluation of Disclosure Controls
and Procedures





We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms
and that such information is accumulated and communicated to our management,
including our interim President, who serves as our principal executive officer
and principal financial officer, as appropriate, to allow timely decisions
regarding required disclosure.





Our
interim President reviewed and evaluated the effectiveness of the design and
operation of our disclosure controls and procedures (as defined by Rule
240.13a-15(e) or 15d-15(e)) of the Exchange Act Rule 13a-15 as of the end of the
period covered by this report.  Based upon this evaluation, our interim
President concluded that, as of the end of such period, our disclosure controls
and procedures were effective as of the end of the fiscal year covered by this Form
10-K.





(b)
Management’s Annual Report on Internal Control over Financial
Reporting





The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act and for assessing the effectiveness of internal
control over financial reporting.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. In addition, projections of any evaluation of
effectiveness of internal control over financial reporting to future periods are
subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may
deteriorate.





Management
has assessed the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2009.  In making its assessment of
internal control over financial reporting, management used the criteria
established in Internal Control — Integrated Framework, issued by the
Committee of Sponsoring Organizations of the Treadway
Commission.  This assessment included an evaluation of the design of
the Company’s internal control over financial reporting and testing of the
operational effectiveness of those controls.  Based on the results of
this assessment, management has concluded that the Company’s internal control
over financial reporting was effective as of December 31, 2009.





This
Annual Report on Form 10-K does not include an attestation report of the
Company’s registered public accounting firm regarding internal control over
financial reporting.  Management’s report was not subject to
attestation by the Company’s registered public accounting firm pursuant to
temporary rules of the SEC that permit the Company to provide only management’s
report in this Annual Report on Form 10-K.





(c)
Changes in Internal Control over Financial Reporting





There
were no changes in the Company’s internal control over financial reporting that
occurred during the fourth quarter of the year ended December 31, 2009 that have
materially affected, or that are reasonably likely to materially affect, the
Company’s internal control over financial reporting.





Item
9B.  Other Information.





None


-
34 -


PART
III





Item
10.  Directors, Executive Officers and Corporate
Governance.





We have a
one person Board of Directors, none of whom are employees or affiliates of the
Company.





Name
            Age
            PositionEric
      Stoppenhagen
            36
            Interim
      President, Secretary and Director





Biographical
Information





Eric Stoppenhagen.Mr.
Stoppenhagen, through his consulting company, Venor, Inc., provides financial
and management services to small to medium-sized companies that either are
public or desire to become public. He provides temporary CFO services to these
companies, which includes as transaction advice, preparation of security filings
and advice regarding compliance with corporate governance requirements. Mr.
Stoppenhagen has more than ten years of financial experience having served in an
executive capacity for several public and private companies; including as Vice
President of Finance  and subsequently Interim President of Trestle
Holdings, Inc. from 2003 to 2009;Interim President and
Director of WoozyFly, Inc. from 2009 to 2010; Interim President of Trist
Holdings, Inc. from 2007 to 2010; CFO and Director of AuraSource, Inc. from 2008
to 2010; CFO of GetFugu, Inc. in 2009; and, CFO of Jardinier Corp. from 2007 to
2008. Mr. Stoppenhagen is a Certified Public Accountant and holds a Juris
Doctorate and Masters of Business Administration both from George Washington
University. Additionally, he holds a Bachelor of Science in Finance and a
Bachelor of Science in Accounting both from Indiana University.





Certain
Legal Proceedings





To our
knowledge, during the past five years, none of our directors, executive
officers, promoters, control persons, or nominees has been:





•
            the
      subject of any bankruptcy petition filed by or against any business of
      which such person was a general partner or executive officer either at the
      time of the bankruptcy or within two years prior to that
    time;





•
            convicted
      in a criminal proceeding or is subject to a pending criminal proceeding
      (excluding traffic violations and other minor
  offenses);





•
            subject
      to any order, judgment, or decree, not subsequently reversed, suspended or
      vacated, of any court of competent jurisdiction, permanently or
      temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities;
      or





•
            found
      by a court of competent jurisdiction (in a civil action), the Commission
      or the Commodity Futures Trading Commission to have violated a federal or
      state securities or commodities
law.





-
35 -


Section
16(a) Beneficial Ownership Reporting Compliance.





Section
16(a) of the Securities Exchange Act of 1934 requires that our executive
officers and directors, and persons who own more than ten percent of a
registered class of our equity securities, file reports of ownership and changes
in ownership with the SEC.  Executive officers, directors and
greater-than-ten percent stockholders are required by SEC regulations to furnish
us with all Section 16(a) forms they file.  Based solely on our review
of the copies of the forms received by us and written representations from
certain reporting persons that they have complied with the relevant filing
requirements, we believe that, during the year ended December 31, 2009, all of
our executive officers, directors and greater-than-ten percent stockholders
complied with all Section 16(a) filing requirements.





Director
Independence




Our board
of directors currently consists of one member: Eric Stoppenhagen.




We do not
have a separately designated audit, compensation or nominating committee of our
board of directors and the functions customarily delegated to these committees
are performed by our full board of directors.  We are not a “listed
company” under SEC rules and are therefore not required to have separate
committees comprised of independent directors.  We have, however,
determined that Eric Stoppenhagen is not “independent” as that term is defined
in Section 4200 of the Marketplace Rules as required by the NASDAQ Stock
Market.







Item
11.  Executive Compensation





The following table
and related footnotes show the compensation paid during the fiscal years ended
December 31, 2009 and 2008, to the Company's named executive
officers:





Summary
Compensation Table


All
      OtherName
      and Principal
            Year
            
            Salary
            
            
            Bonus
            
            
            Option
      Awards
            
            
            Compensation
            
            
            TotalPosition
            
            
            ($)
            
            
            ($)
            
            
            ($)
            
            
            ($)
            
            
            ($)(a)
            (b)
            
            (c)
            
            
            (d)
            
            
            (f)
            
            
            (i)
            
            
            (j)Jonathan
      Bomser (1)
            2008
            
            $
            62,500
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            $
            62,500Former
      Chief Executive Officer
            2009
            
            $
            6,250
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            $
            6,250Todd
      Bomser (2)
            2008
            
            $
            10,000
            
            
            
            --
            
            
            
            --
            
            
            $
            32,500
            
            
            $
            42,500Former
      Chief Financial Officer
            2009
            
            $
            8,500
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            $
            8,500Jeanne Drewsen (3)
            2008
            
            $
            39,375
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            $
            39,375Former
      Secretary and Counsel
            2009
            
            $
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Eric
      Stoppenhagen (4)
              Interim
      President and Director
            2009
            
            $
            29,500
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            $
            29,500





(1)          Joined
the Company on July 28, 2008 and resigned on January 15, 2009.


(2)          Joined
the Company on July 28, 2008 and resigned January 15, 2009. Other compensation
relates to amounts paid to Spiewak, Gottesman, Bomser & Company, PA for his
services


(3)          Joined
the Company on July 28, 2008 and resigned January 15, 2009.


(4)          Joined
the Company on January 15, 2010.  Mr. Stoppenhagen currently serves as
Interim President and the sole director.





-
36 -


Employment
Agreements





On July 28, 2008, Pet Express
and Mr. Bomser entered into an agreement to provide additional incentive
compensation to Mr. Bomser in connection with his services which are over and
above the duties and responsibilities set forth in his employment agreement.
Under this incentive agreement, Mr. Bomser is entitled to receive the following
percent of the proceeds from certain transactions involving the sale of the
Company or a major portion thereof: 5% of the first $10,000,000; 4% of the
second $10,000,000, and 2.5% of the next $80,000,000 (and no percent of proceeds
in excess of $100,000,000).





All of
the agreements with Jonathan Bomser have been cancelled.





On January 7, 2009, we entered into an
agreement with Venor, Inc. to provide consulting services on a month to month
basis.   Eric Stoppenhagen, a principle of Venor, Inc., will provide
executive financial services to the Company.  Venor, Inc. will be paid
$15,000 the first month, $10,000 the second month, $7,500 the third month,
$5,000 the fourth month, and $3,500 every month thereafter.





Outstanding
equity awards at fiscal year-end





As of December 31, 2009, the only
officer or director of the company with equity awards is Jeanne
Drewsen.  She currently has 600,000 options exercisable at $0.67 per
share.





Compensation
of Directors








DIRECTOR
      COMPENSATION FY 2009 and 2008Name
            Fees
              Earned
      or
              Paid
      in
              Cash
              ($)
            Stock
              Awards
              ($)
            Option
              Awards
              ($)
            Non-Equity
              Incentive
              Plan
              Compensation
              ($)
            Nonqualified
              Deferred
              Compensation
      Earnings
              ($)
            All
              Other
              Compensation
              ($)
            Total
              ($)All
      Directors
            -
            -
            -
            -
            -
            -
            -





We
currently do not pay our directors for service on the board of
directors.





Previously,
we compensated certain of our directors with option grants.





All
former directors of the Company agreed to cancel all stock options previously
granted to them.





-
37 -


Item
12.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters





The
following table sets forth certain information, as of January 28, 2010 with
respect to the beneficial ownership of the Company’s outstanding common stock by
(i) any holder of more than five (5%) percent; (ii) each of the named executive
officers, directors and director nominees; and (iii) our directors, director
nominees and named executive officers as a group. Except as otherwise indicated,
each of the stockholders listed below has sole voting and investment power over
the shares beneficially owned. Unless otherwise indicated, the address for each
shareholder is c/o the Company.





Name
      of Beneficial Owner
            
            
            Common
      Stock
              Beneficially
      Owned
            
            
            Percentage
      of Common
              Stock
      Beneficially
              Owned
      (1)Vision
      Opportunity Master Fund Ltd.
              20
      West 55th
      Street, 5th
      Floor
              New
      York, New York 10019
            
            
            1,743,456
            
            
            9.9
            %Highbridge
      International LLC
              9
      West 57th
      Street, 27th
      Floor
              New
      York, NY 10019
            
            
            405,000
            
            
            6.7
            %Portside
      Growth & Opportunity Fund
              390
      Greenwich Street, 3rd
      Floor
              New
      York, NY 10013
            
            
            920,000
            
            
            22.4
            %WF
      Holdings, LLC
              44
      Easton Road
              Westport,
      CT 06880
            
            
            405,000
            
            
            13.8
            %Eric
      Stoppenhagen
            
            
            -0-
            
            
            n/aAll
      officers and directors as a group (1 persons)
            
            
            -0-
            
            
            n/a
            %


_______________


* Less
than one percent.


(1) Beneficial
ownership percentages gives effect to the completion of the Share Exchange and
issuance of the Notes and Warrants, and are calculated based on 17,610,672
shares of common stock issued and outstanding on January 28,
2010.  Beneficial ownership is determined in accordance with Rule
13d-3 of the Exchange Act.  The number of shares beneficially owned by a
person includes shares of common stock underlying options or warrants held by
that person that are currently exercisable or exercisable within 60 days of
January 28, 2010.  The shares issuable pursuant to the exercise of
those options or warrants are deemed outstanding for computing the percentage
ownership of the person holding those options and warrants but are not deemed
outstanding for the purposes of computing the percentage ownership of any other
person.  The persons and entities named in the table have sole voting and
sole investment power with respect to the shares set forth opposite that
person’s name, subject to community property laws, where applicable, unless
otherwise noted in the applicable footnote.





Securities
Authorized for Issuance Under Equity Compensation Plans





None





Changes in Control
Arrangements





There
existed no change in control arrangements at December 31, 2009.





-
38 -


Item
13.   Certain Relationships and Related Transactions, and Director
Independence.





None





Director
Independence





In
conjunction with the preparation of this registration statement, using the
definition of “independence” established by the NASDAQ Stock Market, we have
evaluated all relationships between each director and the Company.





Based on
the foregoing definition, we have determined that none of our directors
currently meet the definition of an “independent” director under the standards
established by NASDAQ. We do not currently have an audit, nominating or
compensation committee.





Our Board
of Directors will continually monitor the standards established for director
independence under applicable law or listing requirements and will take all
reasonable steps to assure compliance with those standards.





Item
14.  Principal Accountant Fees and Services





Independent
Public Accountants





Weaver
& Martin, LLC has audited the Company’s financial statements since fiscal
year 2006, and the Board of Directors of the Company has selected Weaver &
Martin, LLC as the Company’s independent auditors to audit the financial
statements of the Company for the fiscal year ending December 31,
2009.





Fees
Paid to Weaver & Martin, LLC





Audit
Fees





The aggregate fees billed by Weaver
& Martin, LLC for the audit of the Company’s financial statements for the
years ended December 31, 2009 and 2008, the reviews of the quarterly reports on
Form 10-Q for the same fiscal years and statutory and regulatory filings were
$10,250 for 2009  and $17,000 for 2008.





Audit-Related
Fees





None





Tax
Fees





None





Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of
Independent Auditors





The Board’s policy is to
pre-approve all audit and permissible non-audit services provided by the
independent registered public accounting firm. These services may include audit
services, audit-related services, tax services and other services. Pre-approval
is generally detailed as to the particular service or category of services and
is generally subject to a specific budget. The independent registered public
accounting firm and management are required to periodically report to the Board
regarding the extent of services provided by the independent registered public
accounting firm in accordance with this pre-approval, and the fees for the
services performed to date. The Board may also pre-approve particular services
on a case-by-case basis.





The Board has determined that
the rendering of the services other than audit services byWeaver &
Martin, LLCis
compatible with maintaining the principal accountant’s
independence.





-
39 -


PART
IV





Item
15.  Exhibits and Financial Statement Schedules.





(a)
            The
      following documents are filed as a part of this
  Report:





1.
            Financial
      Statements. The following financial statements of
      Woozyfly Inc. are included in
Item 8:





Reports
of Independent Registered Public Accounting Firms.





Balance
Sheets as of December 31, 2009 and 2008.





Statements
of Operations for the year ended December 31, 2009 and 2008.





Statements
of Stockholders’ Deficit for the years ended December 31, 2009 and
2008.





Statements
of Cash Flows for the years ended December 31, 2009 and 2008.





Notes to
Financial Statements.










2.
            Financial
      Statement Schedule(s):





All
schedules are omitted for the reason that the information is included in the
financial statements or the notes thereto or that they are not required or are
not applicable.





-
40 -





3.
            Exhibits:





EXHIBIT
      NUMBER
            
            DESCRIPTION2.1
            
            Share
      Exchange Agreement (3)3.1
            
            Articles
      of Incorporation (1)3.2
            
            Certificate
      of Amendment to the Articles of Incorporation (4)3.3
            
            Amended
      and Restated By-Laws (4)4.1
            
            Form
      of Warrant (3)4.2
            
            Form
      of Note (3)10.1
            
            Loan
      and Security Agreement (3)10.2
            
            Employment
      Agreement between CJ Vision Enterprises, Inc. and Jonathan Bomser
      (3)10.3
            
            Sublease
      Agreement between JSM Music, Inc. and CJ Vision Enterprises, Inc.
      (3)10.4
            
            Executive
      Compensation Agreement dated July 28, 2008 between the Company and
      Jonathan Bomser (3)10.5
            
            Employment
      Agreement between the Company and Todd Bomser (3)10.6
            
            Consulting
      Agreement between the Company and Spiewak, Gottesman et al.
      (3)10.7
            
            Restricted
      Stock Purchase Agreement (4)10.8
            
            2008
      Employee Option Plan (4)10.9
            
            Consulting
      Agreement between WoozyFly, Inc. and Venor, Inc.( Incorporated by
      reference to Registrant’s Current Report Form 8-K filed on January 20,
      2009)10.10
            
            Agreement
      and Plan of Merger between WoozyFly, Inc. and STW Resources, Inc.(
      Incorporated by reference to Exhibit 10.1 of Registrant’s Current Report
      Form 8-K filed on January 26, 2010)21
            
            List
      of Subsidiaries31
            
            Certification
      of Principal Executive Officer and Principal Financial Officer pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.32
            
            Certification
      of Principal Executive Officer and Principal Financial Officer pursuant to
      18 U.S.C. Section 1350, as adopted pursuant to section 906 of the
      Sarbanes-Oxley Act of 2002.





(1)           Incorporated
by reference to the Registration Statement on Form SB-2, previously filed with
the SEC on September 26, 2006.


(2)           Incorporated
by reference herein to the Form 8-K, previously filed with the SEC on January
30, 2006.


(3)           Incorporated
by reference to Registrant’s Current Report Form 8-K filed on August 1,
2008.


(4)           Incorporated
by reference to Registrant’s Quarterly Report on Definitive Information
Statement filed on September 4, 2008.


-
41 -


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.





Woozyfly Inc.Date:
      January 28, 2010
            
            
            By:
            /s/  
      ERIC STOPPENHAGEN
              -----------------------------------------------------------
              Name:
      Eric Stoppenhagen
              Title:
      Interim President
              (Principal
      Executive Officer, Principal Financial and Accounting
Officer)


POWER OF ATTORNEY




The
undersigned directors and officer of Woozyfly Inc. do hereby constitute and
appoint Eric Stoppenhagen with full power of substitution and resubstitution, as
their true and lawful attorneys and agents, to do any and all acts and things in
our name and behalf in our capacities as directors and officer and to execute
any and all instruments for us and in our names in the capacities indicated
below, which said attorney and agent, may deem necessary or advisable to enable
said corporation to comply with the Securities Exchange Act of 1934, as amended
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Annual Report on Form 10-K, including
specifically but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto, and we do hereby ratify and
confirm all that said attorneys and agents, or either of them, shall do or cause
to be done by virtue hereof.




Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.




SIGNATURE
            TITLE
            DATE/s/ ERIC
      STOPPENHAGEN
            Interim
      President and Secretary
            January
      28, 2010Eric
      Stoppenhagen
            (Principal
      Executive Officer)/s/ ERIC
      STOPPENHAGEN
            Chief
      Financial Officer
            January
      28, 2010Eric
      Stoppenhagen
            (Principal
      Financial Officer)/s/ERIC
      STOPPENHAGEN
            Director
            January
      28, 2010Eric
      Stoppenhagen


-
42 -