` 
**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-QSB**

 

(Mark One)

**[X]  QUARTERLY REPORT PURSUANT TO SECTION 13	OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the quarterly period ended: March 31,	2008
 
**Or**
 
**[   ]  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: 000-52654
 
**PET EXPRESS SUPPLY, 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.)
  
5219 S. Pittsburg St., Spokane, WA

99223

(Address of principal executive offices)

(Zip Code)
  
(509) 990-2630

(Registrant's telephone number, including area	code)
   
(Former name, former address and former fiscal	year, if changed since last report)

 

Check whether the issuer (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  

Yes [   ]   No [X]

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act) 

Yes [X]   No [   ]

 

**APPLICABLEONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVEYEARS:**

Indicate by check mark whether the registrant hasfiled all documents and reports required to be filed by Sections 12, 13 or 15(d)of the Securities Exchange Act of 1934 subsequent to the distribution ofsecurities under a plan confirmed by a court.

Yes [   ]   No [   ]

 

**APPLICABLEONLY TO CORPORATE ISSUERS:**

Indicate the number of shares outstanding of eachof the issuer's classes of common stock, as of April 25, 2008:

5,455,000

 

 

 
**PET EXPRESS SUPPLY, INC.**

**(ADevelopment Stage Company)**

 

 

**Table ofContents**

 
 
**Page**
  
PART I  FINANCIAL INFORMATION

3

     Unaudited	Financial Statements

3

          Condensed	Balance Sheet

4

          Condensed	Statements of Operations

5

          Condensed	Statements of Cash Flows

6

          Notes	to Condensed Financial Statements

7

     Management's	Discussion and Plan of Operation

11

     Controls	and Procedures

13

PART II  OTHER INFORMATION

13

     Unregistered	Sales of Equity Securities

13

     Exhibits	and Reports on Form 8-K

14

SIGNATURES

15

 

 

 

 

 

 
 
-2-

 
**PART I FINANCIAL INFORMATION**

 

**Unaudited Financial Statements**

 

The accompanying unaudited financial statementshave been prepared in accordance with generally accepted accounting principlesfor interim financial reporting and pursuant to the rules and regulations of theSecurities and Exchange Commission ("Commission").  While these statementsreflect all normal recurring adjustments which are, in the opinion ofmanagement, necessary for fair presentation of the results of the interimperiod, they do not include all of the information and footnotes required bygenerally accepted accounting principles for complete financial statements.  Forfurther information, refer to the financial statements and footnotes thereto,which are included in the Company's Annual Report on Form 10-KSB previouslyfiled with the Commission on February 22, 2008.

 

 

 

 

 

 

 

 

 

 

 
 
-3-

 
**Pet Express Supply, Inc.**

**(aDevelopment Stage Company)**

**Condensed Balance Sheet**

 

 
  
**March 31,**
  
**2008**

**Assets**
     
	Current assets:
  
Cash 

$

15,634

Inventory
 
728

Total current assets
 
16,362
   
Fixed assets, net of accumulated	depreciation of $1,139
 
560
    
$

16,922
   
**Liabilities and Stockholders' Equity**
     
	Current liabilities:
  
Accounts payable

$

900

Accrued interest
 
1,493

Note payable
 
10,000

Total current liabilities
 
12,393
   
	Stockholders' equity:
  
Common stock, $0.001 par value,	100,000,000 shares 
  
authorized, 5,455,000 shares issued	and outstanding
 
5,455

Additional paid-in capital
 
48,284

(Deficit) accumulated during	development stage
 
(49,210)
  
4,529
    
$

16,922

 

 

 

The accompanyingnotes are an integral part of these financial statements.

 

 
 
-4-

 
**Pet Express Supply, Inc.**

**(aDevelopment Stage Company)**

**Condensed Statements of Operations**

 

 
 
**For the three months ended**
 
**September 11, 2003**
 
**March 31,**
 
**(Inception) to**
 
**2008**
 
**2007**
 
**March 31, 2008**
         
Revenue

$

56
 
$

-
 
$

1,007

Cost of goods sold
 
49
  
-
  
851
         
Gross profit
 
7
  
-
  
156
         
Expenses**:**
        
General and administrative expenses
 
5,408
  
3,856
  
37,522

General and administrative	expense-related party
 
-
  
-
  
5,000

Depreciation expense
 
142
  
142
  
1,139

Total expenses
 
5,550
  
3,998
  
43,661
         
Operating loss
 
(5,543)
  
(3,997)
  
(43,505)
         
Other expenses:
        
Interest expense
 
249
  
1,041
  
5,705

Total other expenses
 
249
  
1,041
  
5,705
         
(Loss) before provision for taxes
 
(5,792)
  
(5,039)
  
(49,210)
         
Provision for income taxes
    
-
  
-
         
Net (loss)

$

(5,792)
 
$

(5,039)
 
$

(49,210)
         
Weighted average number of
        
common shares outstanding - basic and	fully diluted
 
5,455,000
  
5,055,000
            
Net (loss) per share-basic and fully	diluted

$

(0.00)
 
$

(0.00)
   
 

 

 

The accompanyingnotes are an integral part of these financial statements.

 

 
 
-5-

 
**Pet Express Supply, Inc.**

**(aDevelopment Stage Company)**

**Condensed Statements of Cash Flows**

 

 
 
**For the three months ended**
 
**September 11, 2003**
 
**March 31,**
 
**(Inception) to**
 
**2008**
 
**2007**
 
**March 31, 2008**
         
**Cash flows from operating	activities**
        
Net (loss)

$

(5,792)
 
$

(5,039)
 
$

(49,210)

Adjustments to reconcile net (loss) to
        
   net cash (used) by operating	activities:
        
     Shares issued for services	related party
 
-
  
-
  
5,000

     Amortization of warrants issued	for financing costs
 
-
  
829
  
4,212

     Depreciation
 
142
  
142
  
1,139

Changes in operating assets and	liabilities:
        
   (Increase) in inventory
 
49
  
-
  
(728)

   Increase (decrease) in accounts	payable
 
600
  
(268)
  
900

   Increase in accrued interest
 
249
  
212
  
1,493

Net cash (used) by operating	activities
 
(4,752)
  
(4,124)
  
(37,194)
         
**Cash flows from investing	activities**
        
   Purchase of fixed assets
 
-
  
-
  
(1,699)

Net cash (used) by investing	activities
 
-
  
-
  
(1,699)
         
**Cash flows from financing	activities**
        
   Increase in note payable
 
-
  
-
  
10,000

   Donated capital
 
-
  
-
  
200

   Issuances of common stock
 
-
  
-
  
44,327

Net cash provided by financing	activities
 
-
  
-
  
54,527
         
Net increase in cash
 
(4,752)
  
(4,124)
  
15,634

Cash  beginning
 
20,386
  
4,331
  
-

Cash  ending

$

15,634
 
$

207
 
$

15,634
         
Supplemental disclosures:
        
   Interest paid

$

-
 
$

-
 
$

-

   Income taxes paid

$

-
 
$

-
 
$

-
         
Non-cash transactions:
        
   Shares issued for services

$

-
 
$

-
 
$

5,000

   Number of shares issued for	services  related party
 
-
  
-
  
5,000,000

   Amortization of warrants issued for	financing costs

$

-
 
$

829
 
$

4,212

   Number of warrants issued for	financing costs
 
-
  
-
  
350,000

 

 

 

The accompanying notes are an integral part ofthese financial statements.

 

 
 
-6-

 
**Pet Express Supply, Inc.**

**(aDevelopment Stage Company)**

**Notes to Condensed FinancialStatements**

 

**Note1  Basis of presentation**

 

The interimfinancial statements included herein, presented in accordance with United Statesgenerally accepted accounting principles and stated in US dollars, have beenprepared by the Company, without audit, pursuant to the rules and regulations ofthe Securities and Exchange Commission (SEC).  Certain information and footnotedisclosures normally included in financial statements prepared in accordancewith generally accepted accounting principles have been condensed or omittedpursuant to such rules and regulations, although the Company believes that thedisclosures are adequate to make the information presented not misleading.

 

Thesestatements reflect all adjustments, consisting of normal recurring adjustments,which, in the opinion of management, are necessary for fair presentation of theinformation contained therein.  It is suggested that these condensed interimfinancial statements be read in conjunction with the financial statements of theCompany for the year ended December 31, 2007 and notes thereto included in theCompany's annual report on Form 10-KSB.  The Company follows the same accountingpolicies in the preparation of interim reports.

 

Results ofoperations for the interim periods are not indicative of annual results. 

 

**Note 2History and organization of the company**

 

The Company wasorganized September 11, 2003 (Date of Inception) under the laws of the State ofNevada, as GPP Diversified, Inc.  The business of the Company is to sell petproducts via the Internet.  The Company has no operations and in accordance withSFAS #7, the Company is considered a development stage company.  

 

The Company wasinitially authorized to issue 25,000,000 shares of its no par value commonstock.  On November 9, 2005, the Company amended its articles of incorporationto 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. toPet Express Supply, Inc.  

 

**Note 3Going concern**

 

Theaccompanying financial statements have been prepared assuming the Company willcontinue as a going concern.  As shown in the accompanying financial statements,the Company has incurred a net loss of ($49,210) for the period from September11, 2003 (inception) to March 31, 2008, and had minimal sales of $1,007.  Thefuture of the Company is dependent upon its ability to obtain financing and uponfuture profitable operations from the development of its new businessopportunities.  

 

The financialstatements do not include any adjustments relating to the recoverability andclassification of recorded assets, or the amounts of and classification ofliabilities that might be necessary in the event the Company cannot continue inexistence.

 

Theseconditions raise substantial doubt about the Company's ability to continue as agoing concern.  These financial statements do not include any adjustments thatmight arise from this uncertainty.

 

 

 

 
 
-7-

 
**Pet Express Supply, Inc.**

**(aDevelopment Stage Company)**

**Notes toCondensed Financial Statements**

 

**Note 4  Fixed assets**

 

Fixed assetsconsisted of the following: 

 
 
***March 31,***
 
***2008***
 
***2007***

Computer equipment

$     1,699
 
$      1,699
    
Accumulated depreciation

(1,139)
 
(573)
 
$        560
 
$      1,126

 

During the three monthperiods ended March 31, 2008 and 2007, the Company recorded depreciation expenseof $142 and $142, respectively.

 

**Note 5Debt and interest expense**

 

On August 23,2006, the Company conducted a private offering of debt securities, whereby itsecured up to $17,500 in bridge loan financing from one non-affiliated entity,whereby the note holder agreed to finance the Company in increments of $2,500,as needed.  To date, the note holder has loaned the Company $10,000.  Theaggregate principal amount and interest accrued thereupon was due December 31,2007, and is currently past due.  The note bears an interest rate of 10%,calculated annually, and contains no prepayment penalty.  During the threemonths ended March 31, 2008, the Company recorded interest expense of $249related to the note payable.  

 

In connectionwith the debt offering, the note-holder was issued warrants to purchase sharesof the Company's par value common stock.  Resultantly, a discount of $4,212 wasattributed to the value of the note, which amount was amortized over a period ofapproximately 16 months.  As of December 31, 2007, the full amount of $4,212 hasbeen amortized and recorded as interest expense related to the warrants.  Seenote 7 for additional discussion regarding the issuance of warrants.

 

Interestexpense totaled $249 and $1,041 for the three months ended March 31, 2008 and2007, respectively.

 

**Note 6Stockholders' equity**

 

On September11, 2003, the Company issued 5,000,000 shares of its par value common stock asfounders' shares to an officer and director in exchange for services rendered inthe amount of $5,000.  

 

On September11, 2003, the sole officer and director of the Company paid for expenses on ourbehalf in the amount of $200.  The entire amount is considered donated capitaland recorded as additional paid-in capital.

 

On March 3,2006, the Company conducted a private placement, whereby it issued 75,000 sharesof its par value common stock for cash in the amount of $7,500.

 

On April 3,2006, the Company rescinded 20,000 shares of common stock issued in the privateoffering and returned the cash investment of two shareholders, totaling $2,000.

 

On May 3, 2007,the Company completed a public offering, whereby it sold 400,000 shares of itspar value common stock for total gross cash proceeds in the amount of $40,000. Total offering costs related to this issuance was $1,174.

 

As of March 31,2008, there have been no other issuances of common stock.

 
 
-8-

 
**Pet Express Supply, Inc.**

**(aDevelopment Stage Company)**

**Notes toCondensed Financial Statements**

 

**Note 7Warrants and options**

 

On August 23,2006, the Company issued warrants to purchase shares of the Company's par valuecommon stock to one non-affiliated entity in conjunction with a bridge loanagreement.  The warrant holder was granted the right to purchase 350,000 sharesof common stock of the Company for an aggregate purchase price of $38,500 or$0.11 a share.  The aggregate fair value of such warrants totaled $26,693 basedon the Black Schoeles Merton pricing model using the following estimates: 6%risk free rate, 100% volatility and expected life of the warrants ofapproximately 5 years.

 

The followingis a summary of the status of all of the Company's stock warrants as of March31, 2008 and 2007 and changes during the three months ended on those dates:

 
 
***Number***

***Of Shares***
 
***Weighted-Average***

***Exercise Price***

Outstanding at December 31, 2006

350,000
 
$ 0.11

Granted

0
 
$ 0.00

Exercised

0
 
$ 0.00

Cancelled

0
 
$ 0.00

Outstanding at March 31, 2007

350,000
 
$ 0.11

Granted

0
 
$ 0.00

Exercised

0
 
$ 0.00

Cancelled

0
 
$ 0.00

Outstanding at December 31, 2007

350,000
 
$ 0.11

Granted

0
 
$ 0.00

Exercised

0
 
$ 0.00

Cancelled

0
 
$ 0.00

Outstanding at March 31, 2008

350,000
 
$ 0.11

	Options exercisable at March 31, 2007

350,000
 
$ 0.11

Options exercisable at March 31, 2008

350,000
 
$ 0.11

 

The followingtables summarize information about stock warrants outstanding and exercisable atMarch 31, 2008:

 
  
**STOCK WARRANTS OUTSTANDING**

*Exercise Prices*
 
*Number of*

*Shares*

*Outstanding*
 
*Weighted-Average*

*Remaining*

*Contractual*

*Lifein Years*
 
*Weighted-*

*Average*

*Exercise Price*

$ 0.11
 
350,000
 
3.45
 
$ 0.11
  
350,000
 
3.45
 
$ 0.11

 
  
**STOCK WARRANTS EXERCISABLE**

*Exercise Prices*
 
*Number of*

*Shares*

*Exercisable*
 
*Weighted-*

*Average*

*Exercise Price*

$ 0.11
 
350,000
 
$ 0.11
  
350,000
 
$ 0.11

 

As of March 31,2008, there were no warrants or options outstanding to acquire any additionalshares of common stock.

 

 
 
-9-

 
**Pet Express Supply, Inc.**

**(aDevelopment Stage Company)**

**Notes toCondensed Financial Statements**

 

**Note 8Related party transactions**

 

The Companydoes not lease or rent any property.  Office services are provided withoutcharge by an officer and director of the Company.  Such costs are immaterial tothe financial statements and, accordingly, have not been reflected therein.  Theofficers and directors of the Company are involved in other business activitiesand may, in the future, become involved in other business opportunities.  If aspecific business opportunity becomes available, such persons may face aconflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.

 

 

 

 

 

 

 

 

 

 

 

 
 
-10-

 
**Management's Discussionand Plan of Operation**

 

**Forward-Looking Statements**

 

This Quarterly Report contains forward-lookingstatements about Pet Express Supply, Inc.'s business, financial condition andprospects that reflect management's assumptions and beliefs based on informationcurrently available.  We can give no assurance that the expectations indicatedby such forward-looking statements will be realized.  If any of our management'sassumptions should prove incorrect, or if any of the risks and uncertaintiesunderlying such expectations should materialize, PXPS actual results may differmaterially from those indicated by the forward-looking statements.

 

The key factors that are not within our control andthat may have a direct bearing on operating results include, but are not limitedto, acceptance of our services, our ability to expand our customer base,managements' ability to raise capital in the future, the retention of keyemployees and changes in the regulation of our industry.

 

There may be other risks and circumstances thatmanagement may be unable to predict.  When used in this Quarterly Report, wordssuch as,  *"believes,"*  *"expects," "intends,"*  *"plans,"*  *"anticipates,"* *"estimates"*and similar expressions are intended to identifyforward-looking statements, although there may be certain forward-lookingstatements not accompanied by such expressions.

 

**Management'sDiscussion and Analysis**

 

Since our inception, we have worked with thesingular goal of executing our business plan and establishing a base ofoperations in the pet supply industry.  During the three months ended March 31,2008, we generated revenues in the amount of $56 from sales of pet supplies. During the year ago period ended March 31, 2007, no revenues were realized. The reason for our lack of revenues in 2007 was that we had no salableinventory until the second quarter of 2007.  Since our inception on September11, 2003 through March 31, 2008, we generated a total of $1,007 in sales.  We donot have any long-term agreements to supply our pet supplies to any onecustomer.  We have no recurring customers and have no ongoing revenue sources.  

 

In association with sales of pet products, weincurred cost of goods sold in the amount of $49 during the three month periodended March 31, 2008.  This amount represents a gross margin of approximately14% on sales of our products.  After factoring in cost of goods sold, our grossprofit was $7 for the three months ended March 31, 2008.  In the year ago threemonth period ended March 31, 2007; we did not incur any cost of goods sold, aswe did not sell any items.  Since our inception to March 31, 2008, total cost ofgoods sold amounted to $851, resulting in a gross profit of $156, for a grossmargin of 18%.

 

In the execution of our business, we incurdepreciation expense and various general and administrative costs.  General andadministrative expenses mainly consist of office expenditures and accounting andlegal fees.  During the three months ended March 31, 2008, we spent $5,550,consisting of $142 in depreciation expense on our computer equipment and $5,408in general and administrative expenses.  In the comparable three month periodended March 31, 2007, we incurred $3,998 in total expenses, made up of $142 indepreciation expense and $3,856 in general and administrative expenses.  

 

Aggregate operating expenses from our inceptionthrough March 31, 2008 were $43,661, of which $1,139 is attributable todepreciation expense, $5,000 in general and administrative expense paid to anofficer and director for services rendered and $37,522 in general andadministrative expenses related to the execution of our business plan.  Nodevelopment related expenses have been or will be paid to our affiliates.  Weexpect to continue to incur general and administrative expenses for theforeseeable future, although we cannot estimate the extent of these costs.

 

On August 23, 2006, we secured bridge loanfinancing, through which we are able to borrow up to $17,500, in increments of$2,500.  The loan bears an interest rate of 10% per annum.  Through the periodended March 31, 2008, we borrowed a total of $10,000, which balance was due asof December 31, 2007, and is currently past due.  In the three months endedMarch 31, 2008 and 2007, we recognized interest expense of $249 and $1,041,respectively, related specifically to the bridge loan. Since our inception, werecorded interest expense totaling $5,705.

 
 
-11-

 
As a result of our minimal revenues and incurringongoing expenses related to the implementation of our business, we haveexperienced net losses in all periods since our inception on September 11, 2003. In the three month period ended March 31, 2008, our net loss totaled $5,792,compared to a net loss of $5,039 in the prior period ended March 31, 2007. Since our inception, we have accumulated net losses in the amount of $49,210. We anticipate incurring ongoing operating losses and cannot predict when, if atall, we may expect these losses to plateau or narrow.  We have not beenprofitable for five consecutive years from our inception in 2003 through present2008.  There is significant uncertainty projecting future profitability due toour history of losses, lack of revenues, and due to our reliance on theperformance of third parties on which we have no direct control.  

 

In order for us to achieve profitability andsupport our planned ongoing operations, we estimate that we must generate aminimum of $16,000 sales per year.  However, we cannot guarantee that we willgenerate additional sales, let alone achieve that target.  Our management hasidentified increasing exposure of our website as our top priority for the nextsix months to assist us in reaching our goal of $16,000 in sales.  We hadattempted to optimize our placement for pet supply searches through the Googlesearch engine.  Unfortunately, we did not realize any sales and subsequentlydiscontinued the program.  Our management is currently contemplating a newmarketing and advertising strategy through which we can generate greater brandawareness and exposure for our website.  As of the date of this report, we havenot yet formulated a new marketing plan and have no current marketing oradvertising efforts in place.  

 

Our management expects that we will experience netcash out-flows for the fiscal year 2008, given developmental nature of ourbusiness.  We have only recently begun to accumulate an inventory of petsupplies for sale and initiated our advertising and marketing efforts.  If we donot generate sufficient revenues and cash flows to support our operations overthe next 12 months, or if our costs of operations increase unexpectedly, we mayneed to raise capital by conducting additional issuances of our equity or debtsecurities for cash.  We can not assure you that any financing can be obtainedor, if obtained, that it will be on reasonable terms.  As such, our principalaccountants have expressed substantial doubt about our ability to continue as agoing concern because we have limited operations and have not fully commencedplanned principal operations.  

 

We believe that our cash on hand as of March 31,2008, in the amount of $15,634, is not sufficient to execute our plannedoperations for the next approximately 12 months, as expenses are likely toexceed working capital.  To date, we have received financing from third partiesthrough sales of our equity and debt securities and expect we may need to pursueadditional financing options in the next 6 to 9 months to continue operating asa going concern.

 

On September 5, 2006, we secured bridge loanfinancing in an effort to sustain our start up operations.  We are able toborrow in increments of $2,500, up to an aggregate of $17,500.  The loan bearsan interest rate of 10% per annum.  The total amount borrowed, along with anyaccrued interest, was due December 31, 2007, and is currently past due.  As ofMarch 31, 2008, we have borrowed a total of $10,000.  We cannot guarantee thatwe will be able to repay any amount borrowed.  If we fall into default on thisloan, we may be unable to extend our repayment date or obtain sufficient fundsto satisfy the debenture.  

 

In connection with the debt offering, the noteholder was issued warrants to purchase 350,000 shares of our common stock.  Theaggregate purchase price is $38,500, or $0.11 per share.  Assuming the exerciseof all of the warrants, we intend to use the gross proceeds of $38,500 forgeneral working capital.  However, we cannot assure you that the warrant holderwill exercise any of the warrants.

 

We closed our offering of common stock on March 31,2007, whereby we sold an aggregate of 400,000 shares at a price per share of$0.10, for gross proceeds of $40,000.  After taking into account offering costsin the amount of $1,174, net proceeds from this offering was $38,826.  

 

Our management does not anticipate the need to hireadditional full- or part- time employees over the next 12 months, as theservices provided by our current officers and directors appear sufficient atthis time.  Our officers and directors work for us on a part-time basis, and areprepared to devote additional time, as necessary.  We do not expect to hire anyadditional employees over the next 12 months.  

 

Our management does not expect to incur researchand development costs.

 

We do not have any off-balance sheet arrangements.

 

We currently do not own any significant plant orequipment that we would seek to sell in the near future.  

 
 
-12-

 

We have not paid for expenses on behalf of ourdirectors.  Additionally, we believe that this fact shall not materially change.

 

We currently do not have any material contracts andor affiliations with third parties.

 

**Controls andProcedures**

 

We maintain a set of disclosure controls andprocedures designed to ensure that information required to be disclosed by us inour reports filed under the Securities Exchange Act, is recorded, processed,summarized and reported within the time periods specified by the SEC's rules andforms.  Disclosure controls are also designed with the objective of ensuringthat this information is accumulated and communicated to our management,including our chief executive officer and chief financial officer, asappropriate, to allow timely decisions regarding required disclosure.

 

Based upon their evaluation as of the end of theperiod covered by this report, our chief executive officer and chief financialofficer concluded that our disclosure controls and procedures are not effectiveto ensure that information required to be included in our periodic SEC filingsis recorded, processed, summarized, and reported within the time periodsspecified in the SEC rules and forms.

 

Our board of directors was advised by Weaver andMartin, LLC, our independent registered public accounting firm, that duringtheir performance of audit procedures for 2007 Weaver and Martin, LLC identifieda material weakness as defined in Public Company Accounting Oversight BoardStandard No. 2 in our internal control over financial reporting.

 

This deficiency consisted primarily of inadequatestaffing and supervision that could lead to the untimely identification andresolution of accounting and disclosure matters and failure to perform timelyand effective reviews.  However, our size prevents us from being able to employsufficient resources to enable us to have adequate segregation of duties withinour internal control system.  Management is required to apply its judgment inevaluating the cost-benefit relationship of possible controls and procedures.

 

**PART IIOTHER INFORMATION**

 

**Unregistered Sales of EquitySecurities**

 

In March 2006, we sold 75,000 shares of our commonstock to six shareholders, three of whom are affiliates of PES.  The shares wereissued at a price of $0.10 per share for total cash in the amount of $7,500. The shares bear a restrictive transfer legend.  This March 2006 transaction (a)involved no general solicitation, (b) involved less than thirty-fivenon-accredited purchasers and (c) relied on a detailed disclosure document tocommunicate to the investors all material facts about Pet Express Supply, Inc.,including an audited balance sheet, statements of income, changes instockholders' equity and cash flows.  Each purchaser was given the opportunityto ask questions of us.  Thus, we believe that the offering was exempt fromregistration under Regulation D, Rule 505 of the Securities Act of 1933, asamended.

 

In April 2006, we returned the investment of twonon-affiliated shareholders, aggregating $2,000 (or 20,000 shares of our commonstock).  The shares were returned to our authorized capital and are notconsidered issued nor outstanding.

 

On August 23, 2006, we conducted a private offeringof debt securities, whereby we secured up to $17,500 in bridge loan financingfrom Lynn Cole Capital, a non-affiliated entity, whereby the note holder agreedto finance us in increments of $2,500, as needed.  To date, the note holder hasloaned us a total of $5,000.  The aggregate principal amount and interestaccrued thereupon is due December 31, 2007.  The note bears an interest rate of10%, calculated annually, and contains no prepayment penalty.  In connectionwith the debt offering, the note holder was issued warrants to purchase 350,000shares of our common stock for an aggregate purchase price of $38,500, or $0.11a share.  The securities were issued in reliance upon an exemption fromregistration contained in Section 4(2) of the Securities Act.

 
 
-13-

 
**Exhibits and Reports on Form 8-K**

 

**Exhibit**

**Number**

**Name and/or Identification of	Exhibit**
  
3

Articles of Incorporation & By-Laws
   
(a) Articles of Incorporation *
   
(b) By-Laws *
  
31

Rule 13a-14(a)/15d-14(a)	Certifications
   
(a) Renea Yamada
   
(b) Diane Egger
  
32

Certification under Section 906 of the	Sarbanes-Oxley Act (18 U.S.C. Section 1350)
  
*  Incorporated by reference herein	filed as exhibits to the Company's Registration Statement on Form SB-2	previously filed with the SEC on September 26, 2006, and subsequent	amendments made thereto.

 

 

 

 

 

 

 
 
-14-

 
**SIGNATURES**

 

Pursuant to the requirementsof the Exchange Act of 1934, the Registrant has duly caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.

 

**PET EXPRESS SUPPLY, INC.**

(Registrant)
 
Signature

Title

Date
   
/s/ Renea Yamada

President and 

May 1, 2008

Renea Yamada

Chief Executive Officer
    
/s/Diane Egger

Secretary-Treasurer and

May 1, 2008

Diane Egger

Chief Financial Officer
 
 

 

 

 

 

 

 

 

 

 
 
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