SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q





ý    QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For
Quarterly Period Ended March 31, 2009





or





o    TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For
the transition period from
         
to





Commission
File Number 000-51430





WoozyFly,
Inc.


(Exact
name of registrant issuer 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, New York
      10001(Address
      of principal executive offices, including zip code)Registrant’s
      phone number, including area code    (949)
      903-0468





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 ý    
NO o





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 o
Accelerated Filer o
Non-accelerated Filer o Smaller reporting
company ý







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







Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.





Class
            
            Outstanding
      at May 11, 2009Common
      Stock, $.0001 par value
            
            17,610,672




















WOOZYFLY,
INC.





INDEX





PART
      I
            FINANCIAL
      INFORMATIONITEM
      1.
            FINANCIAL
      STATEMENTS:Condensed
      Balance Sheets — March 31, 2009 (Unaudited) and December 31,
      2008Condensed
      Statements of  Operations (Unaudited) — Three months ended March
      31, 2009 and 2008Condensed
      Statements of Cash Flows (Unaudited) —Three months ended March 31, 2009
      and 2008Notes
      to Condensed Financial StatementsITEM
      2.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONSITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM
      4.
            CONTROLS
      AND PROCEDURESPART
      II
            OTHER
      INFORMATION








-
2 -


PART I -
FINANCIAL INFORMATION





ITEM I — FINANCIAL STATEMENTS





WOOZYFLY,
INC.


CONDENSED BALANCE SHEETS





March
      31
            
            December
      312009
            
            2008ASSETS
            (Unaudited)CURRENT
      ASSETSCash
      and cash equivalents
            
            $
            5,244
            
            
            $
            37,842TOTAL
      CURRENT ASSETS
            
            
            5,244
            
            
            
            37,842TOTAL
      ASSETS
            
            $
            5,244
            
            
            $
            37,842LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIES:Accounts
      payable
            
            $
            156,614
            
            
            $
            76,925Accrued
      interest
            
            
            73,583
            
            
            
            48,120Current
      portion of note payable
            
            
            297,507
            
            
            
            297,507TOTAL
      CURRENT LIABILITIES
            
            
            527,704
            
            
            
            422,552LONG
      TERM LIABILITIESNotes
      Payable
            
            
            1,400,000
            
            
            
            1,400,000TOTAL
      LIABILITIES
            
            
            1,927,704
            
            
            
            1,822,552STOCKHOLDERS'
      EQUITY/(DEFICIT):Common
      stock, $0.0001 par value, 100,000,000 shares authorized, 17,610,672 issued
      and outstanding at March 31, 2009 and December 31, 2008
            
            
            17,610
            
            
            
            17,610Additional
      paid in capital
            
            
            2,248,604
            
            
            
            2,248,604Accumulated
      deficit
            
            
            (4,188,675
            )
            
            
            (4,050,924
            )Total
      stockholders' deficit
            
            
            (1,922,460
            )
            
            
            (1,784,710
            )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
            
            $
            5,244
            
            
            $
            37,842








See
accompanying notes to the condensed financial statements.








-
3 -





WOOZYFLY,
INC.


CONDENSED STATEMENTS OF
OPERATIONS


(UNAUDITED)







Quarter
      Ended March 31,2009
              
              
              2008REVENUES
              
              
              $
              —
              
              
              $
              —COST
      OF SALES
              
              
              
              —
              
              
              
              —GROSS
      PROFIT
              
              
              
              —
              
              
              
              —OPERATING
      EXPENSESSelling,
      general and administrative expenses
              
              
              
              32,500
              
              
              
              —LOSS
      FROM OPERATIONS
              
              
              
              (32,500
              )
              
              
              —Interest
      expense and other, net
              
              
              
              (22,809
              )
              
              
              —Loss
      from continuing operations
              
              
              
              -55,309Loss
      from discontinued operations
              
              
              
              (82,441
              )
              
              
              (5,792
              )NET
      LOSS APPLICABLE TO COMMON STOCKHOLDERS
              
              
              $
              (137,751
              )
              
              $
              (5,792
              )NET
      LOSS PER SHARE OF COMMON STOCK—Basic and diluted
              
              
              $
              (0.01
              )
              
              $
              (0.00
              )WEIGHTED
      AVERAGE SHARES OUTSTANDING—Basic and diluted
              
              
              
              17,610,672
              
              
              
              5,455,000







See
accompanying notes to the condensed financial statements.





-
4 -





WOOZYFLY,
INC.


CONDENSED STATEMENTS OF CASH
FLOWS


(UNAUDITED)





Three
      Months Ended March 31,2009
            
            
            2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Loss
      from continuing operations
            
            $
            (55,309
            )
            
            $
            —Changes
      in operating assets and liabilities, net of effects from
      acquisition/disposition of business:Accrued
      interest
            
            
            25,463Accounts
      payable
            
            
            34,000
            
            
            
            —Net
      cash provided by operating activities from continuing
      operations
            
            
            4,154
            
            
            
            —Net
      cash used in operating activities from discontinued
    operations
            
            
            (36,752
            )
            
            
            (4,752
            )Net
      cash used in operating activities
            
            
            (32,598
            )
            
            
            (4,752
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      proceeds from issuance of note payable
            
            
            —
            
            
            
            —Net
      cash provided by financing activities
            
            
            —
            
            
            
            —NET
      (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            (32,598
            )
            
            
            (4,752
            )CASH
      AND CASH EQUIVALENTS, Beginning of period
            
            
            37,842
            
            
            
            20,386CASH
      AND CASH EQUIVALENTS, End of period
            
            $
            5,244
            
            
            $
            15,634





Three
      months Ended March 31,2009
            
            2008SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      received/(paid) during the period for:Interest
            
            $
            —
            
            
            $
            —Income
      taxes
            
            $
            —
            
            
            $
            —SUPPLEMENTAL
      DISCLOSURE OF NON CASH TRANSACTIONSNone





See
accompanying notes to the condensed financial statements.





-
5 -





WOOZYFLY,
INC.


NOTES TO CONDENSED FINANCIAL
STATEMENTS


(UNAUDITED)





NOTE
1.    SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





Current
Operations and Background— Woozyfly Inc., (“Woozyfly,” “Company,” “we,”
“us,” or “our”) 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.




The
Company was initially authorized to issue 25,000,000 shares of its no par value
common stock.  On November 9, 2005, the Company amended its articles of
incorporation to increase its authorized capital to 100,000,000 shares with a
par value of $0.001.  Concurrently, the Company 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, the Company 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 will cause us to petition for bankruptcy protection.





Going Concern— The accompanying financial statements have been prepared assuming that
we will continue as a going concern.  We have suffered recurring
losses from operations since our inception and have an accumulated deficit of
$4,188,675 at March 31, 2009.  The financial statements do not include
any adjustments relating to the recoverability and classification of recorded
asset amounts or amounts and classifications of liabilities that might be
necessary should we be unable to continue our existence.  The recovery
of our assets is dependent upon continued operations of the
Company.





In addition, our recovery is dependent
upon future events, the outcome of which is undetermined.  We intend
to continue to attempt to raise additional capital, but there can be no
certainty that such efforts will be successful.





-
6 -


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





The
unaudited financial statements have been prepared by us pursuant to the rules
and regulations of the Securities and Exchange Commission. The information
furnished herein reflects all adjustments (consisting of normal recurring
accruals and adjustments) which are, in the opinion of management, necessary to
fairly present the operating results for the respective periods. Certain
information and footnote disclosures normally present in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted pursuant to such rules and
regulations. These financial statements should be read in conjunction with the
audited financial statements and footnotes for the year ended December 31, 2008
included in our Annual Report on Form 10-K. The results of the three month ended
March 31, 2009 are not necessarily indicative of the results to be expected for
the full year ending December 31, 2009.





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— We consider investments with original maturities of
90 days or less to be cash equivalents.





Income Taxes—We record income taxes in accordance with the provisions of Statement of
Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income
Taxes.”  The standard requires, among other provisions, an asset and
liability approach to recognize deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the financial
statement carrying amounts and tax basis of assets and
liabilities.  Valuation allowances are provided if, based upon the
weight of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.





Stock-Based
Compensation—On January 1, 2006, the Company adopted SFAS No. 123
(revised 2004), “Share-Based Payment,” (“SFAS 123(R)”) which was issued in
December 2004. SFAS 123(R) revises SFAS No. 123, “Accounting for Stock Based
Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued
to Employees,” and its related interpretations. SFAS 123(R) requires recognition
of the cost of employee services received in exchange for an award of equity
instruments in the financial statements over the period the employee is required
to perform the services in exchange for the award. SFAS 123(R) also requires
measurement of the cost of employee services received in exchange for an award.
SFAS 123(R) also amends SFAS No. 95, “Statement of Cash Flows,” to require the
excess tax benefits be reported as financing cash inflows, rather than as a
reduction of taxes paid, which is included within operating cash flows. The
Company adopted SFAS 123(R) using the modified prospective method. Accordingly,
prior period amounts have not been restated. Under this application, the Company
recorded the cumulative effect of compensation expense for the unvested portion
of previously granted awards that remain outstanding at the date of adoption and
recorded compensation expense for all awards granted after the date of
adoption.





SFAS
123(R) provides that income tax effects of share-based payments are recognized
in the financial statements for those awards that will normally result in tax
deduction under existing law. Under current U.S. federal tax law, the Company
would receive a compensation expense deduction related to non-qualified stock
options only when those options are exercised and vested shares are received.
Accordingly, the financial statement recognition of compensation cost for
non-qualified stock options creates a deductible temporary difference which
results in a deferred tax asset and a corresponding deferred tax benefit in the
income statement. The Company does not recognize a tax benefit for compensation
expense related to incentive stock options unless the underlying shares are
disposed in a disqualifying disposition.





-
7 -


Net Income (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 quarters ended March 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.





Recently Issued
Accounting Pronouncements—





In
December 2008, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest.  This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.  The adoption of SFAS 160 has not had a significant
impact on our results of operations or financial position.




In
December 2008, the FASB issued SFAS No. 141 (revised 2008), “Business
Combinations.”  This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
SFAS 141 that the acquisition method of accounting (which SFAS 141 called
the purchase method) be used for all business combinations and for an acquirer
to be identified for each business combination. This statement defines the
acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. This statement requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. This statement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The adoption of SFAS 160 has not had a significant impact on
our results of operations or financial position.





In March,
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows.





FASB
Statement No. 161 achieves these improvements by requiring disclosure of the
fair values of derivative instruments and their gains and losses in a tabular
format. It also provides more information about an entity’s liquidity by
requiring disclosure of derivative features that are credit risk–related.
Finally, it requires cross-referencing within footnotes to enable financial
statement users to locate important. The adoption of SFAS 161 has not had a
significant impact on our results of operations or financial
position.





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8 -


In April
2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible
Assets”, (FSP 142-3). FSP 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible
Assets”. FSP 142-3 is effective for fiscal years beginning after December 15,
2008. The adoption of FSP 142-3 has not had a significant impact on our
financial position and results of operations.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (SFAS No. 162). SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements. SFAS No. 162 is effective 60 days following
the SEC’s approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles”. The implementation of this standard will not
have a material impact on our consolidated financial position and results of
operations.





In June
2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted
in Share-Based Payment Transactions Are Participating Securities” (FSP EITF
03-6-1). FSP EITF 03-6-1 clarified that all outstanding unvested share-based
payment awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are
considered participating securities and the two-class method of computing basic
and diluted earnings per share must be applied. FSP EITF 03-6-1 is effective for
fiscal years beginning after December 15, 2008. The adoption of FSP EITF 03-6-1
has not had a significant impact on our financial position and results of
operations.





In June
2008, the FASB ratified EITF Issue No. 07-5, “Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity’s Own Stock” (EITF 07-5). EITF
07-5 provides that an entity should use a two step approach to evaluate whether
an equity-linked financial instrument (or embedded feature) is indexed to its
own stock, including evaluating the instrument’s contingent exercise and
settlement provisions. It also clarifies on the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning
after December 15, 2008. The adoption of EITF  07-5 has not had a
significant impact on our financial position and results of
operations.





In June
2008, the FASB ratified EITF Issue No. 08-3, “Accounting for Lessees for
Maintenance Deposits Under Lease Arrangements” (EITF 08-3). EITF 08-3 provides
guidance for accounting for nonrefundable maintenance deposits. It also provides
revenue recognition accounting guidance for the lessor. EITF 08-3 is effective
for fiscal years beginning after December 15, 2008. The adoption of EITF 08-3
has not had a significant impact on our financial position and results of
operations.





NOTE
2 - NOTE PAYABLE.





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.




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9 -


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.




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.





NOTE
3 - WARRANTS





During
the year ended December 31, 2008, the Company issued 27,066 warrants to
Westminster Securities Corporation and 5,378,610 warrants.  We have
5,378,610 warrants issued and outstanding at March 31, 2009.The following
summarizes pricing and term information for warrants issued to investors which
are outstanding as of March 31, 2009:





Options
      Outstanding
            
            Options
      ExercisableRange
      of Exercise Prices
            
            Number
      Outstanding at December 31, 2008
            
            Weighted
      Average Remaining Contractual
              Life
            
            Weighted
      Average Exercise Price
            
            Number
      Exercisable at December 31, 2008
            
            Weighted
      Average Exercise Price$0.01
            
            
            3,776,544
            
            
            4.25
            
            
            $0.01
            
            
            3,776,544
            
            
            $0.01$0.75
            
            
            1,602,066
            
            
            4.25
            
            
            $0.75
            
            
            1,602,066
            
            
            $0.75





-
10 -


NOTE
4 - STOCK OPTION PLANS





We have
issued non-plan options to various employees, directors and
consults.  We believe these options have no value.  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.





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





Options
      Outstanding
            
            Options
      ExercisableRange
      of Exercise Prices
            
            Number
      Outstanding at December 31, 2008
            
            Weighted
      Average Remaining Contractual
              Life
            
            Weighted
      Average Exercise Price
            
            Number
      Exercisable at December 31, 2008
            
            Weighted
      Average Exercise Price$0.67
            
            
            606,000
            
            
            4.50
            
            
            $0.67
            
            
            606,000
            
            
            $0.67





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





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





-
11 -


NOTE
5 – EARNINGS PER SHARE





The following table sets forth common
stock equivalents (potential common stock) for the quarters ended March 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:





Quarters
      Ended March 31,2009
            
            
            2008Weighted
      average common stock equivalents:Stock
      options
            
            
            606,000
            
            
            
            -Warrants
            
            
            5,378,610
            
            
            
            -





NOTE
6 – 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 March 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.





-
12 -


ITEM
2 .  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





The
information contained in this Form 10-Q is intended to update the information
contained in our Annual Report on Form 10-K for the year ended December 31, 2008
and presumes that readers have access to, and will have read, the “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and
other information contained in such Form 10-K.  The following
discussion and analysis also should be read together with our condensed
consolidated financial statements and the notes to the condensed consolidated
financial statements included elsewhere in this Form 10-Q.





The
following discussion contains certain statements that may be deemed
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995.  Such statements appear in a number of
places in this Report, including, without limitation, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.”  These
forward-looking statements can be identified by the use of words such as
“believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,”
“projects,” “expects,” “may,” “will,” or “should” or other variations or similar
words. These statements are not guarantees of future performance and involve
risks, uncertainties and requirements that are difficult to predict or are
beyond our control.  Forward-looking statements speak only as of the
date of this quarterly report. You should not put undue reliance on any
forward-looking statements.  Forward-looking statements reflect
management’s current expectations and are inherently uncertain.  We
strongly encourage investors to carefully read the factors described in our
Annual Report on Form 10-K for the year ended December 31, 2008 in the section
entitled “Risk Factors” for a description of certain risks that could, among
other things, cause actual results to differ from these forward-looking
statements. We assume no responsibility to update the forward-looking statements
contained in this quarterly report on Form 10-Q. The following should also be
read in conjunction with the unaudited Consolidated Financial Statements and
notes thereto that appear elsewhere in this report.





Overview





Woozyfly
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.




The
Company was initially authorized to issue 25,000,000 shares of its no par value
common stock.  On November 9, 2005, the Company amended its articles of
incorporation to increase its authorized capital to 100,000,000 shares with a
par value of $0.001.  Concurrently, the Company 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, the Company ceased operations.  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.  We have been unsuccessful in this attempt.  We
have a substantial amount of secured and unsecured debt. Failure to settle this
debt will cause us to petition for bankruptcy protection.





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13 -


Critical Accounting Policies
and Estimates





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 account for our business
acquisitions under the purchase method of accounting in accordance with
SFAS 141, "Business Combinations." The total cost of acquisitions is
allocated to the underlying net assets, based on their respective estimated fair
values. The excess of the purchase price over the estimated fair value of the
tangible net assets acquired is recorded as intangibles. Determining the fair
value of assets acquired and liabilities assumed requires management's judgment
and often involves the use of significant estimates and assumptions, including
assumptions with respect to future cash inflows and outflows, discount rates,
asset lives, and market multiples, among other items.





We assess the potential impairment of
long-lived assets and identifiable intangibles under the guidance of
SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
which states that a long-lived asset should be tested for recoverability
whenever events or changes in circumstances indicate that the carrying amount of
the long-lived asset exceeds its fair value. An impairment loss is recognized
only if the carrying amount of the long-lived asset exceeds its fair value and
is not recoverable.





We base out 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.





For the Quarters Ended March
31, 2009 and 2008





Results
of Operations





Selling,
General and Administrative Expenses





Selling,
general and administrative expenses were $32,500 and zero for the quarters ended
March 31, 2009 and 2008, respectively.





Interest
Income, Interest Expense and Other





Interest
expense and other, net was $22,809 and zero for the quarters ended March 31,
2009 and 2008, respectively, an increase in expense of $22,809.  The
increase is principally due to increased debt.





Discontinued
Operations


Loss from
discontinued operations was $82,441 and $5,792 for the quarters ended March 31,
2009 and 2008, respectively.




-
14 -


Liquidity
and Capital Resources





Net cash used in operating activities
was $32,598 and $4,752 in the three months ended March 31, 2009 and 2008,
respectively.





We suffered recurring losses from
operations and have an accumulated deficit of $4,188,675 at March 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.  We have been unsuccessful in this
attempt.  We have a substantial amount of secured and unsecured debt.
Failure to settle this debt will cause us to petition for bankruptcy
protection.





Inflation and
Seasonality





Inflation
has not been material to us during the past five years. Seasonality has not been
material to us.





Recent Accounting
Pronouncements





In
December 2008, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest.  This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.  The adoption of SFAS 160 has not had a significant
impact on our results of operations or financial position.




In
December 2008, the FASB issued SFAS No. 141 (revised 2008), “Business
Combinations.”  This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
SFAS 141 that the acquisition method of accounting (which SFAS 141 called
the purchase method) be used for all business combinations and for an acquirer
to be identified for each business combination. This statement defines the
acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. This statement requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. This statement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The adoption of SFAS 160 has not had a significant impact on
our results of operations or financial position.





In March,
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows.





-
15 -


FASB
Statement No. 161 achieves these improvements by requiring disclosure of the
fair values of derivative instruments and their gains and losses in a tabular
format. It also provides more information about an entity’s liquidity by
requiring disclosure of derivative features that are credit risk–related.
Finally, it requires cross-referencing within footnotes to enable financial
statement users to locate important. The adoption of SFAS 161 has not had a
significant impact on our results of operations or financial
position.





In April
2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible
Assets”, (FSP 142-3). FSP 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible
Assets”. FSP 142-3 is effective for fiscal years beginning after December 15,
2008. The adoption of FSP 142-3 has not had a significant impact on our
financial position and results of operations.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (SFAS No. 162). SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements. SFAS No. 162 is effective 60 days following
the SEC’s approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles”. The implementation of this standard will not
have a material impact on our consolidated financial position and results of
operations.





In June
2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted
in Share-Based Payment Transactions Are Participating Securities” (FSP EITF
03-6-1). FSP EITF 03-6-1 clarified that all outstanding unvested share-based
payment awards that contain rights to nonforfeitable dividends participate in
undistributed earnings with common shareholders. Awards of this nature are
considered participating securities and the two-class method of computing basic
and diluted earnings per share must be applied. FSP EITF 03-6-1 is effective for
fiscal years beginning after December 15, 2008. The adoption of FSP EITF 03-6-1
has not had a significant impact on our financial position and results of
operations.





In June
2008, the FASB ratified EITF Issue No. 07-5, “Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity’s Own Stock” (EITF 07-5). EITF
07-5 provides that an entity should use a two step approach to evaluate whether
an equity-linked financial instrument (or embedded feature) is indexed to its
own stock, including evaluating the instrument’s contingent exercise and
settlement provisions. It also clarifies on the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning
after December 15, 2008. The adoption of EITF  07-5 has not had a
significant impact on our financial position and results of
operations.





In June
2008, the FASB ratified EITF Issue No. 08-3, “Accounting for Lessees for
Maintenance Deposits Under Lease Arrangements” (EITF 08-3). EITF 08-3 provides
guidance for accounting for nonrefundable maintenance deposits. It also provides
revenue recognition accounting guidance for the lessor. EITF 08-3 is effective
for fiscal years beginning after December 15, 2008. The adoption of EITF 08-3
has not had a significant impact on our financial position and results of
operations.





Off-Balance
Sheet Arrangements– We have no
off-balance sheet arrangements.





-
16 -


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 and may never achieve or maintain
profitability.





We have a history of incurring losses
from operations. As of March 31, 2009, we had an accumulated deficit of
approximately $4,188,675.  We anticipate that our existing cash and
cash equivalents will 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. In the event we use all of our cash resources, MKM has indicated
the willingness to loan us funds at the prevailing market rate until such
business combination is consummated.





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 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.





-
17 -


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 SEC, 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.





-
18 -


Our auditors have
expressed a going concern opinion.





Primarily as a result of our recurring
losses and our lack of liquidity, we 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, 2008.


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.





-
19 -





ITEM 3 – QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





A smaller
reporting company is not required to provide the information required by this
Item.





ITEM
4 - CONTROLS AND PROCEDURES





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 are effective as of the end of the quarter
covered by this Form 10-Q.





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, 2008 that have materially
affected, or that are reasonably likely to materially affect, the Company’s
internal control over financial reporting.


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PART II - OTHER INFORMATION





ITEM
      6.
            
            Exhibits31
            Certification
      of President pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted
      pursuant to section 302 of the Sarbanes-Oxley Act of
  2002.32
            Certification
      of the Company’s Chief Executive Officer, pursuant to 18 U.S.C. Section
      1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.


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SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant has caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





WOOZYFLY,
      INC.Date:
      May 11, 2009
            /s/  ERIC STOPPENHAGENName:
      Eric StoppenhagenTitle: Interim
      President








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EXHIBIT
INDEX





Exhibit
            
            Description31
            
            Certification
      of President pursuant to Exchange Act Rule 13a-14 and 15d-14 as adopted
      pursuant to section 302 of the Sarbanes-Oxley Act of
  2002.32
            
            Certification
      of the Company’s Chief Executive Officer, pursuant to 18 U.S.C. Section
      1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.





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