8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 28, 2008

PET EXPRESS SUPPLY, INC.

(Name of Small Business Issuer in its Charter)

Nevada	000-52654	20-3768799
(State or other jurisdiction of	(Commission File Number)	(I.R.S. Employer
incorporation or organization)		Identification Number)

59 West 19^th Street, 6^th Floor,

New York, NY 10011

(Address, Including Zip Code of Principal Executive Offices)

(646) 461-2400

(Issuer's telephone number)

5219 S. Pittsburg Street

Spokane, WA 99223

(Former name or former address, if changed since last report)

Copies to:

Marc J. Ross, Esq.

Louis A. Brilleman, Esq.

Sichenzia Ross Friedman Ference LLP

61 Broadway

New York, New York 10006

Phone: (212) 930-9700

Fax: (212) 930-9725

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On July 28, 2008, Pet Express Supply, Inc.(“Pet Express”) entered into a Share Exchange Agreement (the “Exchange Agreement”) with each of the shareholders (the “Shareholders”) of CJ Vision Enterprises, Inc., a Delaware corporation doing business as Woozyfly.com (”CJVE,” the “Company” or “Woozyfly”), pursuant to which Pet Express purchased from the Shareholders all issued and outstanding shares of CJVE’s common stock, preferred stock and warrants to purchase CJVE stock in consideration for the issuance of 2,235,112 shares of common stock of Pet Express and, to one of the Shareholders, warrants to purchase 629,424 shares of common stock of Pet Express (the "Share Exchange").

The Share Exchange resulted in a change in control of Pet Express with the Shareholders owning 2,235,112 shares of common stock of Pet Express out of a total of 2,935,112 issued and outstanding shares after giving effect to the Share Exchange.  Also, the Shareholders were elected directors of Pet Express and appointed as its executive officers.  As a result of the Exchange Agreement, (i) CJVE became a wholly-owned subsidiary of Pet Express and (ii) Pet Express succeeded to the business of CJVE as its sole business.  Accordingly, Pet Express intends to change its corporate name to Woozyfly, Inc.

Also on July 28, 2008, Pet Express entered into a Loan and Security Agreement with a number of accredited investors providing for the issuance by Pet Express of its 6% Convertible Notes due June 30, 2011 in the aggregate principal amount of $800,000 and warrants to purchase 150,000 shares of common stock of Pet Express.

The following is a summary of the agreements that Pet Express entered into on July 28, 2008.

Exchange Agreement

Pursuant to the Exchange Agreement, the Shareholders transferred all of their CJVE shares and warrants to purchase shares to Pet Express in consideration of the issuance of 2,235,112 shares of common stock of Pet Express to the Shareholders.  One of the Shareholders also exchanged its warrants to purchase CJVE stock for warrants to purchase 629,424 shares of Pet Express common stock at $0.01 per share. The common stock was issued as follows:

Name	Number of Shares
Vision Opportunity Master Fund Ltd.		290,576(1)
DigitalFX International, Inc.		920,000
WF Holdings, LLC		405,000
Bleecker Holdings, Inc.		405,000
Others		214,536
Total		2,235,112

________________

⁽¹⁾Does not include warrants to purchase 629,424 shares of common stock at $0.01 per share.

Loan and Security Agreement

On July 28, 2008, Pet Express also entered into a Loan and Security Agreement providing for the issuance to several accredited investors by Pet Express of its 6% Convertible Notes due June 30, 2011 in the aggregate principal amount of $800,000 (the “Notes”). The entire principal amount under the Notes plus all accrued and unpaid interest is due on the third anniversary of the date of issuance. Interest is payable on the last day of each calendar quarter, commencing September 30, 2008. Pet Express may make interest payments in cash, or at its option through the reduction of the conversion price discussed below.

The Notes may be converted at any time, at the option of the holder, into shares of common stock of Pet Express at $4.00 per share. The conversion price is subject to adjustment in event Pet Express issues shares (or securities convertible into shares) at a price that is lower than the then applicable conversion price.

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Pet Express 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 Notes, the trading price of Pet Express’s common stock is greater than $7.00 and the average daily trading volume for the preceding 15 trading days exceeds 50,000.

The Notes are subject to mandatory prepayment by Pet Express 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 Notes, with the holders of Notes receiving a proportionate share of such proceeds.

The Notes rank senior to all current and future indebtedness of Pet Express and are secured by substantially all of the assets of Pet Express.

In connection with the issuance of the Notes, Pet Express granted to the investors five-year warrants to purchase an aggregate of 150,000 shares of common stock of Pet Express at $4.50 per share. The warrants contain cashless exercise provisions that enable the holder to exercise the warrants without paying additional consideration and to receive a reduced number of shares in accordance with a formula set forth in the warrant.

Item 2.01 Completion of Acquisition or Disposition of Assets

See Item 1.01 hereof.

NOTE: The discussion regarding Pet Express’s business contained in this Item 2.01 relates primarily to Woozyfly.  Information relating to the business and results of operations of Pet Express and all other information relating to Pet Express was previously reported in its Annual Report on Form 10-KSB for the year ended December 31, 2007 and prior periodic filings with the SEC and is herein incorporated by reference to those reports.

DESCRIPTION OF PET EXPRESS’S BUSINESS

Pet Express Supply, Inc. was incorporated in the State of Nevada on September 11, 2003 to sell pet supplies via the Internet to discriminating feline and canine owners seeking unique products not typically found in the larger pet "superstores."  To date, it has generated no significant revenues from that business.  As a result of the Exchange Agreement, (i) CJVE became a wholly-owned subsidiary of Pet Express and (ii) Pet Express succeeded to the business of CJVE as its sole business.   Accordingly, Pet Express intends to change its name to Woozyfly, Inc.

DESCRIPTION OF WOOZYFLY’S BUSINESS

Overview

General

CJVE was formed on June 1, 2007 to conduct business as a web commerce merchant through "WOOZYFLY.com." Woozyfly is an Internet music and entertainment company that owns and operates WOOZYFLY.com, an on-line music media site devoted to independent music and entertainment, and WOOZY Productions, a production company that produces and owns music videos, reality content, recorded musical performances, animations, recorded concerts and interviews with recording artists, all for streaming on the WOOZYFLY.com website and available for such other uses as the Woozyfly may determine. Woozyfly’s goals are to create the first truly complete music and entertainment resource for broadcasting, promotion, marketing, distribution, licensing, communication, and user generated content online. To that end, it has created a platform for fans, bands, artists, and internet DJs and VJs to connect with each other while discovering new music and entertainment. Woozyfly was founded by music industry veterans and experts in internet marketing, social networks and technology.

WOOZYFLY.comHighlights

· Social networking, communication and marketing/promotion tools are offered to all who become free members—includingstreaming, live and archived video, video-messaging, video e-mail, video chat, video blogs, video classifieds, mobile delivery and podcasts.

· A platform for live webcasting a music/entertainment show creating one’s very own online television channel.

· Thousands of music videos and programming from hundreds of labels and content resources.

· Original music videos, interviews with bands and solo recording artists, concerts and other music-related video programs are produced by WOOZY PRODUCTIONS and streamed on the WOOZYFLY.com Website.

· WOOZYFLY.com offers programming to every music lover and artist and covers a variety of music genres from rock, alternative, pop or metal to hip-hop, electronic/dance, blues or R&B, to country, folk, gospel or Christian.

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Revenue Sources

Advertising Sales.

Woozyfly creates marketing and promotional platforms with a music and entertainment backbone for corporations and strategic partners, record labels and management companies to help promote their products, services and artists. By providing this platform, Woozyfly enables and helps these corporations to create their own 24 hours a day, online television network to enable a unique marketing and promotional vehicle. These parties are able to create original programming (with the help of WOOZYFLY.com’s internal resources), stream commercials, and broadcast live interviews, press conferences, tradeshows, concerts, events, etc.

WOOZYFLY.com also sells display and video advertising on its website. It is offering for sale display ads, video ads, pop-ups and banner ads that are available in standard internet advertising formats. Video within display ads can be auto or user initiated with either a click or mouseover. Banners are available in all types, including Leaderboard, Skyscraper, and Menu placements.

WOOZYFLY.com is also selling the right to:

· sponsor shows broadcast by on-line disc jockeys and/or video jockeys (EJs), live and archived concerts, and other events on the WOOZYFLY.com website; and

· set up a sponsored channel on the woozyfly.com website, with original, customized content to be provided by WOOZYFLY.com and Woozy Productions.

So far WOOZYFLY.com has sold advertising on its website through third party servers that place advertising on the site, and also through its internal sales force. WOOZYFLY.com is currently in discussions with additional parties for the sale of advertising space on its website.

“White Label” Technology Solutions

WOOZYFLY.com creates marketing and promotional platforms with a music and entertainment backbone for corporations and strategic partners, record labels and management companies to help promote their products, services and artists. By providing this platform WOOZYFLY.com enables and helps these corporations to create their own 24 hours a day, online television network to enable a unique marketing and promotional vehicle. These affiliates can create original programming (with the help of WOOZYFLY.com’s internal resources), stream commercials, and broadcast live interviews with spokespersons, press conferences, tradeshows, concerts, events, etc.

Sales and Licensing of Owned Content

In the future, additional revenues may be derived from the packaging and sale of video products produced by WOOZY Productions and owned by Woozyfly. The Company has a catalogue of over 1,400 original music videos and 1,400 audio-only master recordings corresponding to such videos. In addition, the Company has hundreds of videos of interviews with bands, interviews with fans and other programming around music events, and other music-related programming. Over 90% of these recordings, both video and audio, are owned by the Company. The Company is developing a plan to package and sell or license video products and audio products embodying the owned content. Such products could include single-artist CDs, compilation CDs, concert DVD’s, compilation DVD’s of music videos, downloads of music videos and audio-only sound recordings, licenses of audio-only master recordings for use in soundtracks of motion pictures, television shows and video games, and sales of subscriptions to listen to certain video products and/or audio-only recordings. Under most of the agreements with the artists pursuant to which these recordings were produced, the artist must approve any commercial exploitation and may receive a royalty or share of profits from such exploitation.

The video and audio recordings that are not owned by the Company are licensed to the Company by the artists and/or record labels for streaming for various license periods. In most cases, the production and license agreements for such content require the owner to pay to the Company a royalty or percentage of profits resulting from the commercial exploitation of such content (see “Sales of Production Services” below).

Sales of Production Services

The Company can sell the services of Woozy Productions’s experienced and gifted video production team to record labels and artists who would like to have music videos or a concert video created on a work-for-hire basis. The Company has entered into several of such work-for-hire agreements, receiving streaming rights to the videos as compensation, as well as contingent income in the form of profit share in the event that the owner of the recordings exploits the recordings commercially. Such arrangements have been entered into with the well-known bands Lordi and Less Than Jake for concert videos. The Company anticipates that it may receive significant revenue from commercial exploitation of home video products embodying such videos in the future. In the future Woozy Productions may also be able to charge more substantial fees for its production services, including up-front payments that cover expenses, overhead and guaranteed profit.

4

Affiliate Networks

The Company can make money by becoming affiliates of other websites that sell products and share revenue from such sales with the affiliate directing customers to their site. The Company has commenced discussion with several of such websites.

The Woozyfly.com Website and Woozy Productions

WOOZYFLY.com Features Available to All Visitors to the Site

Visitors to WOOZYFLY.com can watch music videos and live or archived shows, listen to songs from a large archive of recordings, and read public profile pages for fans, bands and on-line disc jockeys and/or video jockeys (EJs). Specifically, WOOZYFLY.com provides technology that enables them to:

· Watch music videos, animations and listen to music created and/or licensed by WOOZYFLY.com.

· Watch well-known and amateur EJs who will be broadcasting live and archived music shows.

· View content posted by members and bands on their sites.

· Sign up to become a member and create a free profile.

· Buy music.

· Download free music files.

WOOZYFLY.com Features Available to Members

Membership of WOOZYFLY.com is open to all and free of charge. The feature rich environment of WOOZYFLY.com will include numerous web 2.0 and proprietary technologies to enable communication and interaction between members and content provided on the site.

WOOZYFLY.com provides all its members with (i) free tools to produce quickly and easily customized audio-visual programs and (ii) the opportunity to become an on-line disc jockey or video jockey (an EJ), broadcasting live shows, playing their own music and videos for their audience.

WOOZYFLY believes that its members, including fans, bands and EJs, will be able to utilize an entire suite of tools to communicate more efficiently than any other social network on the web. WOOZYFLY believes that its platform is unique and has a competitive edge compared to other websites because it provides the following features:

· Utilize easy, one-click tools to create personalized web page profiles.

· Upload user generated content onto personalized profile pages, including video, audio and photos.

· Customize users’ profiles to promote their favorite ideas, charities, hobbies, music and playlists and etc.

· Reach other members via profile searches, buddy requests, email and video/audio and text Instant Messaging.

· Listen to streaming music from WOOZYFLY.com’s library of audio recordings.

· Watch music videos from WOOZYFLY.com’s library of thousands of music videos.

· Watch live concerts and club gigs.

· Watch live and archived music shows from WOOZYFLY.com’s featured EJs.

· Access text and/or video blogs maintained by the EJs, in which the EJs discuss music and recording artists and any other topics the user chooses.

· Interact with WOOZYFLY.com’s featured EJs via video/text instant messaging.

· View and interact with other members via buddy lists, email, video/text instant messaging, profile searches, comments to message boards, forums, and groups.

· Use his or her personalized web page to link up and communicate with other users, either via video email, video chat, text message.

· Sell his or her own music or video content, or related items, on his or her personalized web page.

· Buy music, merchandise and services.

· Utilize video classified ads.

· Take part in contests and online events.

· Swap video games.

· Free storage of 5 gigabytes of storage via WOOZYFLY.com’s media vault where members can store photos, videos, music and all of their other media.

· Free text messaging directly from profile page.

· Free email collection and management widget.

· Upgrade their account to include additional storage space, video email, more bandwidth and increased viewership.

· Become an EJ and broadcast their own “music station” to millions of fans through WOOZYFLY.com’s proprietary live streaming video on their profile page.

· Use video email to make their email have impact and originality.

· Transcoders to encode any file format into any another desired file format.

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EJs will be able to:

· Broadcast their own “music station” to millions of fans through WOOZYFLY.com’s proprietary live streaming video.

· Have access to hundreds of free videos per month to customize their playlists for their EJ broadcasts.

· Archive past shows in their media vault that all visitors and members will be able to access and watch.

· Promote their show and music compilations through various groups, message boards and member only promotion tools.

· Have WOOZYFLY.com promote their show via online and offline marketing mixes such as: viral marketing, public relations, and grassroots marketing.

· Sell their music compilations via WOOZYFLY.com’s online store where they will receive a percentage of the sale.

WOOZYFLY.com Features Available to Recording Artists

By utilizing the functionality and tools from their own Profile Page, WOOZYFLY.com allows artists to connect personally and communicate with their entire fan base via webcasts, video instant messaging, video e-mails and text messageblasts to deliver the latest news, releases, contests, tour updates and latest, activities. On its Profile Page, a band has the ability to showcase its videos and latest tracks, and link fans to the band’s own Store (or third party merchandise distributor), where they can sell CDs and merchandise.

WOOZY PRODUCTIONS’ Original Programming

In addition to providing a platform for fans, EJs and artists’ generated content, Woozyfly’s production company division, WOOZY PRODUCTIONS, professionally produces live and archived video programs, including:

§ Programs showcasing artists’ performances at the Woozyfly website (see the “Live at the Loft” and “The Set at JSM Music” pages).

§ Concerts in off-site venues (for example, the “A Hello-ween Extravaganza: Live From New York City—Lordi at the Fillmore at Irving Plaza”; “Girls Don’t Cry: Live at Arlene’s Grocery”, and, upcoming in December, Tub Ring at the Luna Lounge).

§ Live daily streaming (for example, streaming live from 7p.m. - 4a.m. daily from the World Famous Bitter End club, 147 Bleecker Street in Greenwich Village, NYC beginning January 2008)

§ Music videos (for example, Chris Barron, former lead singer of the Spin Doctors, performing his new single “Heartbreak Boulevard”; Pras Michel, formerly of the Fugees, performing his new single “It’s OK”).

§ Live reality programming from the Company’s offices (see “The Flytrap” page).

§ Interviews with artists (see the “Meet the Band” page).

§ Animated videos using sound recordings produced by WOOZY Productions as the soundtrack (see the “Woozy-mation” page).

A majority of the original video recordings made by WOOZY Productions are owned by Woozyfly. Currently, its original content catalogue includes music videos and corresponding studio-quality audio-only recordings of approximately 1400 songs, and interviews with more than 200 bands and/or recording artists.

Cross Promotion Relationships

A large consumer electronics company that manufactures devices from digital video and music players to accessories and televisions has elected to pre-install original music videos produced by WOOZY Productions on its high-resolution MP3 and video player, launched in the second quarter of 2008. This company and WOOZYFLY.com made a joint presentation of this player with the installed Woozy Productions content at the annual Consumer Electronics Show in January 2008. The Company expects this initiative to be successful in cross-promoting WOOZYFLY.com and the products of the electronics company, and consequently to lead to other joint promotional ventures and advertising sales.

Relationships with Music Venues. Woozyfly will be broadcasting live from the World Famous Bitter End at 147 Bleecker Street in Greenwich Village, NYC. For decades, The Bitter End has been the hub of music discovery. From classic musicians such as Bob Dylan, Otis Redding and Bo Didley to more recently popular musicians such as The Spin Doctors, Gavin DeGraw and Norah Jones, many of the world’s greatest recording artists have played there. Woozyfly expects this relationship to lead to other relationships with important music venues in other cities.

Important Record Labels and Established Performing Artists. Over one hundred record labels and many well-known performing artists with huge fan bases have entered into cross-promotion arrangements with WOOZYFLY.com. Pursuant to such arrangements, Woozy Productions produces live concerts and other music-related programs featuring artists with large followings, and the label or artist, as the case may be, joins WOOZYFLY.com in promoting this original and exclusive content on the WOOZYFLY.com website. Among the labels who have participated in such arrangements are Eagle Rock, Blackheart Records, Ferret Records, and The End Records. Artists who have participated in such arrangements include major artists ZZ Top, Kittie, and Lordi.

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Areas of Growth

The Company is planning by develop or purchase a music download store, whose catalogue will include licensed audio recordings and music videos, and Woozy Productions’ original, owned audio recordings and music videos. The Company has also plans to create the largest digital distributor of content (video, audio, audio books, podcasts etc.) on the web utilizing its unique platform.

One of the companies that the Company has opened discussions with, is PayPlay.FM, a company that has over 1,637,000 songs from more than 103,000 artists in its catalogue, giving it the third largest digital music catalogue on the internet. PayPlay.FM offers an attractive and easy to use interface, and offers excellent sound quality, with 192kbps VBR. The site also provides the choice of WMA or MP3 formats, fully compatible with any MP3 player, and is supported by Windows, Mac, and UNIX operating systems, all with no additional software, plug-ins, extensions or bloatware to install. Music may be selected by browsing through files sorted by artist, genres, release date, mood (e.g. angry, brooding, dreamy, funny, party, etc.), or type (e.g. acoustic, background, compilations, etc.).  With no required subscription, anyone can browse the music library and receive recommendations of similar artists. The first 30-seconds of each song may be previewed for free, and songs are available for purchase in unprotected MP3 format for $0.88, or protected WMA format for $0.77. 

Woozyfly.com also intends to add the functionality of used video game swapping on the website. The company has had preliminary discussions with SaySwap, Inc., a company in that business, with a view toward a possible acquisition of SaySwap by the Company.

Other areas for expansion include: artist management, tour booking, music publishing.

Licenses of Web Content and Musical Compositions

WOOZYFLY.com has entered into the following license agreements, with performing rights organizations:

· Blanket “radio” licenses from ASCAP, BMI and SESAC, representatives for the owners of musical compositions, for streaming of audio recordings of musical compositions.

· Blanket “radio” license from Sound Exchange, representative for the owners of sound recordings (artists or record labels), for streaming of audio recordings of musical compositions.

WOOZYFLY.com has entered into license agreements with many record labels for free promotional use of audio only sound recordings and music videos. Record labels and artists who upload music and video content to the WOOZYFLY.com website all agree to the website’s “Terms of Use Agreement” (sometimes referred to as a “click license”), which grants WOOZYFLY.com the right to stream the uploaded content on the terms set forth in the “Terms and Use Agreement”, which may be found by clicking the button captioned “Terms & Disclosures” at the bottom of each page in the WOOZYFLY website network.

In September 2007 WOOZYFLY.com entered into a license agreement with Retail Entertainment Design, LLC, for a two year license of videos, at a flat fee of approximately $44,000, which fee has been paid in full.

Intellectual Property

We have not tried to register copyrights or patents on any of our software programs, methods, or other ideas, but we believe that some of our computer code may have common law copyright protection. In addition, the content of our video production is subject to common law copyright protection. The Company intends to register its copyrights either (i) to all of the thousands of video recordings and audio recordings owned by Woozy Productions, or (ii) just to selected recordings from this catalogue.

We also own the www.woozyfly.com domain name www.woozyfly.com (as well as wooziefly.com, woozeefly.com, woozyfly.biz, woozyfly.info. woozyfly.net, woozyfly.mobi, woozyfly.org, woozyfly.tv, woozyfly.us, woozyflyinc.com), and own or hold exclusive and non-exclusive licenses to several proprietary software applications relating to video e-mail, video instant messaging, live webcasting and digital vault storage technology, including a perpetual non-exclusive license we obtained from Wowza Media.

We have a policy of entering into confidentiality and non-disclosure agreements with our employees and some of our vendors and customers as we deem necessary. These agreements and policies are intended to protect our intellectual property, but we cannot ensure that these agreements or the other steps we have taken to protect our intellectual property will be sufficient to prevent theft, unauthorized use or adverse infringement claims. We cannot prevent piracy of our methods and features, and we cannot determine the extent to which our methods and features are being pirated. Further, the laws of some foreign countries do not protect our proprietary rights as well as the laws of the United States.

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Competition

We compete against well-capitalized social network and Internet based media companies as well as many smaller companies. The market for our products and services is highly competitive. The sector that we operate in is evolving and growing rapidly, and companies are continually introducing new products and services.

Competitive parameters include the range of our product offerings, the performance and quality of our products and services, the reliability of our infrastructure, our expertise and experience in streaming media technology, our scalability and capacity, ease of use, the price of our services, and the level of customer support.

In many cases, competitors may have longer operating histories, more customers, greater financial strength, more name recognition, and larger technical staffs. These competitors may be able to attract customers more easily because of their financial resources and, awareness in the market and free subscriptions because of advertising revenue. Our larger competitors can also devote substantially more resources to business development and may adopt more aggressive pricing policies.

We consider the following entities our main competitors:

· Live365.com (thousands of free online radio stations)

· Livevideo.com (live video broadcaster and video streaming site; social networking profiles)

· MySpace-Social network with large music based promotion engine

· ReverbNation-Social network and band promotion website with tools and features to help with marketing

· MusoCity - This social network is designed around the concept of bringing together fans, musicians, artists, venues, and retailers. You can sign up for free and start sharing profiles, music preferences, and local stores to see what might be going on in your area.

· Ourstage.com - contests that bands can enter, members vote for the winners

· Flotones - This site provides resources for fans and artists to interact with their material. Its main feature is one that allows you to promote your content through cell phones with wallpapers and ringtones. You can do this through your MySpace profile, at your shows, or on a website.

· Rcrdlbl.com - bands can self-market by setting up profile pages

· Sellaband - fans and listeners become producers, investing money into their favorite bands to give them a recording opportunity. The investors get a small cut of the profits and the artists get a chance to record their music, as well as pick up half of the ad revenue from their music being downloaded.

· Last.fm - allows users to keep track of what music they listen to, then search for new music based on their past listening habits. Other features include the ability to listen to new music, learn more about artists, find people who have similar tastes, find local shows, create charts of top songs, and publish any of this information to a different website. Artists can upload and promote their music and videos for free.

· Haystack - Another social network that allows users to search through and create their own music preferences lists, Haystack brings musicians and fans together with free, shareable videos, images, music and review content.

· Mercora Radio - The social network at Mercora allows you to listen to music for free through its online radio service. It allows you to search your own hard drive as well and broadcast all legally purchased music on a radio channel to the world. Bands and artists can create their own playlists, mixing their tracks with favorites from other bands.

· Ourstage - creates on-line contests between bands in various genres, with members to the site voting for the winners.

· Sonific - The sonific interface has two sides. Side one is devoted to allowing musicians to upload and share their music through widgets on the Sonific home page. Side two allows users to access and listen to that music for free, wherever they want to put it - either on a blog, a social networking profile, or a different website. Direct downloads are not allowed.

· Midomi - This site combines the same popularity of regular music social networking with some interesting and exciting new technology that allows people to actually search for songs and artists by humming or singing part of a song. It is the perfect way to find that song that you just cannot remember the name of. While it is not quite as streamlined for artist use, the novelty of its design makes it a probably contender for future growth and expansion, perfect for getting in on the ground floor of now.

· MOG - This social network allows visitors to find new music to listen to by filtering through peoples’ profiles with custom search parameters. You will also find news, music reviews, streaming audio, TV features, and YouTube clips. Imagine MySpace Music as its own site with a few new features.

· iJigg - This site allows you to comment on other songs and share your own favorites or home made tracks. The rating system allows people to decide what becomes popular and there are two different account-types - listener and artist.

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Employees

As of July 28, 2008 Woozyfly had a staff of 21, including 13 full-time employees, 2 part-time employees (including the Chief Financial Officer Todd Bomser), and 6 individuals who work for us on a contractor basis).  None of its employees is represented by a labor union, and Woozyfly considers our employee relations to be excellent.  

Description of Property

Its principal office is located at 59 West 19^th Street, 6^th Floor, New York, New York 10011.  It occupies 4,300 square feet.  The term of the original lease expires November 30, 2008. The monthly rent is $13,000.  

Legal Proceedings

From time to time, Woozyfly may be named in claims arising in the ordinary course of business.  Currently, no legal proceedings or claims are pending against or involving Woozyfly that could reasonably be expected to have a material adverse effect on its business and financial condition.

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MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

Forward Looking Statements

Some of the statements contained in this Form 8-K that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties.  We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 8-K, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties, and other factors affecting our operations, market growth, services, products, and licenses.  No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events.  Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:

1. Our ability to attract and retain management, and to integrate and maintain technical information and management information systems;

2. Our ability to generate customer demand for our services;

3. The intensity of competition; and

4. General economic conditions.

All written and oral forward-looking statements made in connection with this Form 8-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.  Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

Introduction

Effective July 28, 2008, Pet Express acquired all of the capital stock of CJ Vision Enterprises, Inc. (“CJVE”). Consequently, Pet Express owns, and shall continue operating, the business of CJ Vision, comprised of WOOZYFLY.com, a music media and entertainment website devoted to the emerging new music and entertainment business, and WOOZY Productions, a production company that produces and owns music videos, reality content, recorded musical performances, animations, recorded concerts, interviews with recording artists, and other entertainment programming, all for streaming on the WOOZYFLY.com website and available for such other uses as Pet Express may determine. The operations of WOOZYFLY.com and WOOZY Productions are based in New York City, and Pet Express has a staff of 20 people. The acquisition will be accounted for as a reverse acquisition of Pet Express and the financial statements of CJVE will supersede those of Pet Express as a result of which the historical results of Pet Express will be those of CJVE.

WOOZYFLY.com and WOOZY Productions were founded by music industry veterans and experts in internet marketing, social networks and technology. CJVE’s goal was to create the first truly complete music and entertainment resource for broadcasting, promotion, marketing, distribution, licensing, communication, and user generated content online. To this end, the Company has created a platform for bands and solo artists, fans and internet DJs and VJs to connect with each other while discovering new music and entertainment; and for record labels and other companies to market and promote their artists and products.

Overview

The WOOZYFLY.com website offers many services to its members and visitors. Anyone can be a visitor simply by going to the website (www.woozyfly.com). Such services include:

· To all users, including both members and visitors, free music video programming, including thousands of licensed videos and original videos and audio-only recordings produced by WOOZY Productions.

· To members, the ability to creating a profile page and then to post user-generated content.

· To members who become “EJs”, the ability to broadcast their own internet shows using content they upload to their page, or WOOZYFLY.com licensed and original content.

· To members, social networking, communication and marketing/promotion tools—includingstreaming, live and archived video, video-messaging, video e-mail, video chat, video blogs, video classifieds, mobile delivery, podcasts.

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Revenue Sources

Revenue Sources

WOOZYFLY.com and WOOZY Productions have multiple sources of revenue. Of these sources, only the first mentioned below, advertising sales, has yet produced revenue for the Company.

Advertising Sales. One of these sources is advertising sales. Advertising vehicles offered by WOOZYFLY.com include:

o Display and Video Advertising on the Website. WOOZYFLY.com offers for sale display ads, video ads, pop-ups and banner ads that are available in standard internet advertising formats. Video within display ads can be auto- or user-initiated with either a click or mouseover. Banners are available in all types, including Leaderboard, Skyscraper, and Menu placements.

o WOOZYFLY.com is also selling the right to sponsor EJ shows, live and archived concerts, and other events on the WOOZYFLY.com website.

o WOOZYFLY.com is also offering to corporate advertisers the right to set up a sponsored channel on the woozyfly.com website, with original, customized content to be provided by WOOZYFLY.com and Woozy Productions.

At present WOOZYFLY.com sells advertising through third party servers that place ads on the web site, as well as through its internal sales force.

“White Label” Technology Solutions

WOOZYFLY.com creates marketing and promotional platforms with a music and entertainment backbone for corporations and strategic partners, record labels and management companies to help promote their products, services and artists. By providing this platform WOOZYFLY.com enables and helps these corporations to create their own 24 hours a day, online television network to enable a unique marketing and promotional vehicle. These affiliates can create original programming (with the help of WOOZYFLY.com’s internal resources), stream commercials, and broadcast live interviews with spokespersons, press conferences, tradeshows, concerts, events, etc.

Sales and Licensing of Owned Content

The Company has a catalogue of over 1,400 original music videos and 1,400 audio-only master recordings corresponding to such videos. In addition, the Company has hundreds of videos of interviews with bands, interviews with fans and other programming around music events, and other music-related programming. Over 90% of these recordings, both video and audio, are owned by the Company. The Company is developing a plan to package and sell or license video products and audio products embodying the owned content. Such products could include single-artist CDs, compilation CDs, concert DVD’s, compilation DVD’s of music videos, downloads of music videos and audio-only sound recordings, licenses of audio-only master recordings for use in soundtracks of motion pictures, television shows and video games, and sales of subscriptions to listen to certain video products and/or audio-only recordings. Under most of the agreements with the artists pursuant to which these recordings were produced, the artist must approve any commercial exploitation and may receive a royalty or share of profits from such exploitation.

The video and audio recordings that are not owned by the Company are licensed to the Company by the artists and/or record labels for streaming for various license periods. In most cases, the production and license agreements for such content require the owner to pay to the Company a royalty or percentage of profits resulting from the commercial exploitation of such content (see “Sales of Production Services” below).

Sales of Production Services

The Company can sell the services of Woozy Productions’s experienced and gifted video production team to record labels and artists who would like to have music videos or a concert video created on a work-for-hire basis. The Company has entered into several of such work-for-hire agreements, receiving streaming rights to the videos as compensation, as well as contingent income in the form of profit share in the event that the owner of the recordings exploits the recordings commercially. Such arrangements have been entered into with the well-known bands Lordi and Less Than Jake for concert videos. The Company anticipates that it may receive significant revenue from commercial exploitation of home video products embodying such videos in the future. In the future Woozy Productions may also be able to charge more substantial fees for its production services, including up-front payments that cover expenses, overhead and guaranteed profit.

Affiliate Networks

The Company can make money by becoming affiliates of other websites that sell products and share revenue from such sales with the affiliate directing customers to their site. The Company has commenced discussion with several of such websites.

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Critical Accounting Policies

Woozyfly’s critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the notes to combined financial statements which accompany the combined financial statements.  These policies have been consistently applied in all material respects and address such matters as revenue recognition and depreciation methods.  The preparation of financial statements in conformity with accounting principles generally accepted 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 combined financial statements and the reported amounts of revenues and expenses during the reported period.  Actual results could differ from these estimates.

Advertising

Advertising costs are expensed as incurred and amounted to $30,681.

Office Equipment

Office equipment is carried at cost. Depreciation is calculated using the straight line method over the estimated useful lives of the related assets ranging from 5-7 years. Expenditures for repairs and maintenance are charged to expense as incurred.

Website Design Costs

Costs incurred in website design are accounted for under Emerging Issues Task Force 00-2, Accounting for Web Site Development Costs, whereby direct costs related to development and enhancement of internal use software is capitalized, and costs related to maintenance are expensed as incurred. These website development costs are amortized on a straight line basis over the estimated useful life of five years.

Stock Based Compensation

The Company accounts for stock options and warrants using the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (Revised 2004), “Share-Based Payment,” (“SFAS 123(R)”). SFAS 123(R) addresses all forms of share based compensation awards including shares issued under employment stock purchase plans, stock options, restricted stock and stock appreciation rights. Under SFAS 123(R), share based payment awards will be measured at fair value on the awards grant date, based on the estimated number of awards that are expected to vest and will be reflected as compensation expense in the financial statements.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (‘‘FASB’’) issued SFAS No. 157 (‘‘SFAS 157’’), ‘‘Fair Value Measurements.’’ Among other requirements, SFAS 157 defines fair value and establishes a framework for measuring fair value and also expands disclosure about the use of fair value to measure asset and liabilities. SFAS 157 is effective beginning the first fiscal year that begins after November 15, 2007. The Company is currently evaluating the impact of SFAS 157 on its financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”) ‘‘The Fair Value Opinion for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115’’ which permits entities to choose to measure many financial instruments and certain other items at fair value. The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Adoption is required for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS 159. The Company is currently evaluating the expected effect of SFAS 159 on its financial statements and is currently not yet in a position to determine such effects.

In December 2007, the Financial Accounting Standards Board (‘‘FASB’’) issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (‘‘SFAS 141(R)’’). SFAS 141(R) changes accounting for acquisitions that close beginning in 2009 in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, IPR&D and restructuring costs. More transactions and events will qualify as business combinations and will be accounted for at fair value under the new standard. SFAS 141(R) promotes greater use of fair values in financial reporting. In addition, under SFAS 141(R), changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income tax expense. Some of the changes will introduce more volatility into earnings. SFAS 141(R) is effective for fiscal years beginning on or after December 15, 2008. The Company has not yet determined the impact this standard will have on its financial statements.

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In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (‘‘SFAS 160’’). SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests (NCI) and classified as a component of equity. This new consolidation method will significantly change the accounting for transactions with minority interest holders. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company has not yet determined the impact, if any, of SFAS 160 on its financial statements.

In December 2007, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 110 (“SAB 110”). SAB 110 amends and replaces Question 6 of Section D.2 of Topic 14, Share-Based Payment of the Staff Accounting Bulletin series. Question 6 of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the “simplified” method in developing an estimate of the expected term of “plain vanilla” share options and allows usage of that method for option grants prior to December 31, 2007. SAB 110 allows public companies which do not have sufficient historical experience to provide a reasonable estimate to continue the use of this method for estimating the expected term of “plain vanilla” share option grants after December 31, 2007. The adoption of this pronouncement by the Company has not had an effect on its financial statements.

In February 2008, the FASB issued Staff Position No. FAS 140-3, “Accounting for Transfers of Financial Assets and Repurchase Financing Transactions,” which provides guidance on accounting for a transfer of a financial asset and a repurchase financing. This accounting guidance presumes that an initial transfer of a financial asset and a repurchase financing are considered part of the same arrangement (linked transaction) under SFAS No. 140. However, if certain criteria are met, the initial transfer and repurchase financing shall be evaluated separately under SFAS No. 140. Staff Position No. FAS 140-3 will be effective for financial statements issued for fiscal years beginning after November 15, 2008, and for interim periods within those fiscal years. Early adoption is prohibited. Management is evaluating the potential effect this guidance may have on its financial condition and results of operations.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133,” (“SFAS 161”) as amended and interpreted, which requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. Disclosing the fair values of derivative instruments and their gains and losses in a tabular format provides a more complete picture of the location in an entity’s financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period.

Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early adoption is permitted, but not expected.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

Results of Operation

Production Expenses. Since July 11, 2007, C J Vision has produced music and music related video and other video programming for purposes of providing editorial content to the Woozyfly.com website and marketing the Woozyfly.com website.  This expense, approximately $50,000 per month, includes commissions, professional fees and payroll for employees working on production.

Operating Losses

C J Vision’s operations have resulted in Operating Losses and a Net Loss every quarterly period since the Company was incorporated on June 1, 2007. In part this results from the Company’s failure to secure sufficient advertising sales customers to cover operating and other expenses. Management believes that increasing its catalogue, exploiting its catalogue, and consummating advertising sales transactions that C J Vision’s ad sales team has been developing are key factors to achieve an Operating Profit and Operating Income.

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RISK FACTORS

An investment in our securities involves a high degree of risk.  In determining whether to purchase our securities, you should carefully consider all of the material risks described below, together with the other information contained in this Current Report on Form 8-K before making a decision to purchase our securities.  You should only purchase our securities if you can afford to suffer the loss of your entire investment.

RISKS RELATED TO OUR BUSINESS

We have incurred significant losses to date and may continue to incur losses.

From inception on June 1, 2007 through the fiscal year ended December 31, 2007, we incurred a net loss of $1,122,473.  For the three month period ended March 31, 2008, we incurred a net loss of $726,660.  We may continue to incur losses for at least the next 12 months.  Continuing losses will have an adverse impact on our cash flow and may impair our ability to raise additional capital required to continue and expand our operations.

We have a limited operating history for you to evaluate our business. We may never attain profitability.

We have been engaged in the business of internet music and social networking service for only a short amount of time, and have limited current operations.  The business of developing and maintaining websites is inherently risky.  As company with limited operating history, it is difficult for potential investors to evaluate our business.  Our proposed operations are therefore subject to all of the risks inherent in light of the expenses, difficulties, complications and delays frequently encountered in connection with the formation of any new business, as well as those risks that are specific to our industry.  Investors should evaluate us in light of the delays, expenses, problems and uncertainties frequently encountered by companies developing markets for new products, services and technologies.  We may never overcome these obstacles.

Intense competition in the internet social networking industry and in the music media industry may adversely affect our revenue and profitability.

We operate in a highly competitive environment and we compete for members, visitors and advertisers with numerous well established internet social networking sites, as well as many smaller and/or newer sites. As a music media company, we compete for consumers and advertisers with other companies in the music media business, including internet, television and print media companies. In addition to music, there are numerous entertainment products and services available to consumers and, as a result, we also compete with companies that operate in the television, movie and video game industries. If we are unable to differentiate our products and generate sufficient appeal in the marketplace, our ability to achieve our business plan may be adversely affected. The effect of such competition has been to put pressure on profit margins and to involve us in vigorous competition to obtain and retain consumers and advertisers.

As compared to us, many of our competitors have:

· significantly longer operating histories and greater brand recognition;

· greater financial, management and other resources.

If we are unable to compete effectively in our market, our revenue and profitability may be adversely affected.

Our success depends on the scope of our intellectual property rights and not infringing the intellectual property rights of others.

Our success depends in part on our ability to:

· obtain copyrights or trademarks or rights to copyrights or trademarks and to maintain their validity and enforceability;

· operate without infringing upon the proprietary rights of others; and

· prevent others from infringing on our proprietary rights.

We will be able to protect our proprietary intellectual property rights from unauthorized use by third parties only to the extent that our proprietary rights are covered by valid and enforceable copyrights or trademarks. Our inability to protect our proprietary rights could materially adversely affect our business prospects and profitability. In addition, if litigation were to take place in connection with the enforcement of our intellectual property rights (or to defend third party claims of infringement against us), there can be no assurance that we would prevail. Legal proceedings could result in substantial costs and diversion of management time and resources and could materially adversely affect our operations and our financial condition.

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If a copyright or trademark infringement claim is brought against us for liabilities that are not covered or that exceed our insurance coverage, we could be forced to pay substantial damage awards, which could affect our profitability.

The marketing, sale and webcasting of recorded music and video content, most of which have been created using the input of a number of creative personnel, including musicians, producers, mixers, film directors and others, may result in disputes over ownership of rights. If a dispute arises challenging our ownership or other rights, we may be exposed to copyright and/or trademark claims by third parties. We currently have worldwide errors and omissions liability insurance coverage in the amount of $1,000,000. However, such insurance coverage may not protect us against any or all of the copyright and/or trademark claims, which may be brought against us in the future. In addition, we may not be able to maintain adequate insurance coverage at a commercially reasonable cost or in sufficient amounts or scope to protect us against potential losses.

In the event a copyright and/or trademark claim is brought against us:

· we may be required to pay legal and other expenses to defend the claim, as well as uncovered damage awards resulting from a claim brought successfully against us; or

· such party could secure injunctive or other equitable relief, which could effectively block our ability to make, use, sell, distribute or market our products.

If we fail to obtain a necessary licenses or other rights to proprietary rights held by third parties, it could preclude the sale, manufacture, distribution or exhibition of our products and could materially adversely affect our revenue and profitability. Defending any copyright and/or trademark claim or claims could require us to expend significant financial and managerial resources, which could have an adverse effect on our business operations and results of operations.

Copyright laws may negatively affect the value of certain music assets we own.

United States copyright law gives record artists (or their heirs) the right to recapture the rights to their copyrighted material to the extent they are not considered “works made for hire.” If any of our recordings are determined not to be “works made for hire”, the recording artists (or their heirs) will have the right to recapture our rights in those recordings starting 35 years from the date of transfer or assignment of those rights to us. As a result, certain of our assets may be lost if challenged by recording artists seeking to recapture their copyrighted material, thereby potentially negatively affecting our prospects and results of operations.

Our ability to increase our revenue will depend on our ability to increase market penetration of our current social networking and music media products and to evolve our product mix.

The social networking industry and the music industry are, by their nature, businesses that rely upon the acceptance of its creative product by the marketplace. Much of our ability to increase revenue will depend on:

· expanding the market penetration of our current offerings to consumers; and

· the successful evolution of our product mix.

While we are constantly evaluating the marketplace and evolving our offerings of content and internet features, we may not be able to anticipate shifting tastes of our customer base and the creative content offered by us may fall out of favor with our consumers. If we are unable to expand the market penetration of our current products or anticipate changes in consumer taste, our revenue could be reduced.

We may not be able to effectively manage our growth, which may harm our profitability.

Our strategy envisions expanding our business.  If we fail to effectively manage our growth, our financial results could be adversely affected.  Growth may place a strain on our management systems and resources.  We must continue to refine and expand our business development capabilities, our systems and processes and our access to financing sources.  As we grow, we must continue to hire, train, supervise and manage new employees.  We cannot assure you that we will be able to:

· meet our capital needs;

· expand our systems effectively or efficiently or in a timely manner;

· allocate our human resources optimally;

· identify and hire qualified employees or retain valued employees; or

· incorporate effectively the components of any business that we may acquire in our effort to achieve growth.

If we are unable to manage our growth, our operations and our financial results could be adversely affected by inefficiency, which could diminish our profitability.

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We may be unable to obtain additional capital that we will require to implement our business plan, which could restrict our ability to grow.

We expect that our current capital and our other existing resources will be sufficient only to provide a limited amount of working capital, and our revenues alone will not alone be sufficient to fund our operations or planned growth.  We will require additional capital to continue to operate our business beyond the initial phase of our current properties, and to further expand our exploration and development programs.  We may be unable to obtain additional capital required.  Furthermore, inability to maintain capital may damage our reputation and credibility with industry participants.  Although we expect that the proceeds of approximately $800,000 from our recent Offering together with cash flow from operations will be sufficient for the next 12 months, unforeseen circumstances and business setbacks may force us to raise additional funds.  Our inability to raise additional funds when required may have a negative impact on our operations and financial results.

Future acquisitions and future exploration, development, production and marketing activities, as well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of additional capital and cash flow.

We plan to pursue sources of additional capital through various financing transactions or arrangements, including joint venturing of projects, debt financing, equity financing or other means.  We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means.  If we do not succeed in raising additional capital, the capital received through the Offering may not be sufficient to fund our operations going forward without obtaining additional capital financing.

Any additional capital raised through the sale of equity may dilute your ownership percentage.  This could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity.  The terms of securities we issue in future capital transactions may be more favorable to our new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, and issuances of incentive awards under equity employee incentive plans, which may have a further dilutive effect.

Our ability to obtain needed financing may be impaired by such factors as the capital markets (both generally and in the social networking and online marketing businesses in particular), our status as a new enterprise without a significant demonstrated operating history, and/or the loss of key management.  Further, prices for on-line advertising and sponsorships decrease, then our revenues will likely decrease, and such decreased revenues may increase our requirements for capital.  If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs (even to the extent that we reduce our operations), we may be required to cease our operations.

We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs.  We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which may adversely impact our financial condition.

Loss of Jonathan Bomser, our President and Chief Executive Officer, could impair our ability to operate.

If we lose our key employees, Jonathan Bomser, our President and Chief Executive Officer, our business could suffer.  Our success is highly dependent on our ability to attract and retain qualified scientific and management personnel.  We are highly dependent on our management. Mr. Bomser has an employment agreement with the Company.  However, the loss of this person’s services could have a material adverse effect on our operations.  If we were to lose this individual, we may experience difficulties in competing effectively, developing our technology and implementing our business strategies.  We do not have key-man life insurance in place for any person working for us.

Our management team does not have extensive experience in public company matters, which could impair our ability to comply with legal and regulatory requirements.

Our management team has had limited public company management experience or responsibilities.  This could impair our ability to comply with legal and regulatory requirements such as the Sarbanes-Oxley Act of 2002 and applicable federal securities laws including filing required reports and other information required on a timely basis.  There can be no assurance that our management will be able to implement and affect programs and policies in an effective and timely manner that adequately respond to increased legal, regulatory compliance and reporting requirements imposed by such laws and regulations.  Our failure to comply with such laws and regulations could lead to the imposition of fines and penalties and further result in the deterioration of our business.

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RISKS RELATED TO OUR COMMON STOCK

There has been a limited trading market for our common stock and no market.

There is currently no trading market for our common stock. Although we intend to take all steps necessary to have the common stock included for quotation on the Over-The-Counter Bulletin Board, it is anticipated that there will be a limited trading market for the Company's common stock.  The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable.  The lack of an active market may also reduce the fair market value of your shares.  An inactive market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies or technologies by using common stock as consideration.

You may have difficulty trading and obtaining quotations for our common stock.

The common stock may not be actively traded, and the bid and asked prices for our common stock on the NASD's Over-the-Counter Bulletin Board may fluctuate widely.  As a result, investors may find it difficult to dispose of, or to obtain accurate quotations of the price of, our securities.  This severely limits the liquidity of the common stock, and would likely reduce the market price of our common stock and hamper our ability to raise additional capital.

The market price of our common stock may, and is likely to continue to be, highly volatile and subject to wide fluctuations.

The market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including:

· dilution caused by our issuance of additional shares of common stock and other forms of equity securities, which we expect to make in the Offering and in connection with future capital financings to fund our operations and growth, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies;

· announcements of new acquisitions, reserve discoveries or other business initiatives by our competitors;

· our ability to take advantage of new acquisitions, reserve discoveries or other business initiatives;

· fluctuations in revenue from our advertising sales business as new media competitors;

· changes in the market for downloads of music videos and audio recordings;

· changes in the market for online advertising;

· quarterly variations in our revenues and operating expenses;

· changes in the valuation of similarly situated companies, both in our industry and in other industries;

· changes in analysts’ estimates affecting our Company, our competitors and/or our industry;

· changes in the accounting methods used in or otherwise affecting our industry;

· additions and departures of key personnel;

· announcements of technological innovations or new products available to businesses in the online music media, entertainment, marketing and social networking businesses;

· fluctuations in interest rates and the availability of capital in the capital markets; and

· significant sales of our common stock, including sales by the investors following registration of the shares of common stock issued in this Offering and/or future investors in future offerings we expect to make to raise additional capital.

These and other factors are largely beyond our control, and the impact of these risks, singly or in the aggregate, may result in material adverse changes to the market price of our common stock and/or our results of operations and financial condition.

Our operating results may fluctuate significantly, and these fluctuations may cause our stock price to decline.

As a start-up operation, our operating results will likely vary in the future primarily as the result of fluctuations in our revenues and operating expenses. If our results of operations do not meet the expectations of current or potential investors, the price of our common stock may decline.

We do not expect to pay dividends in the foreseeable future.

We do not intend to declare dividends for the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and growth of our business.  Therefore, investors will not receive any funds unless they sell their common stock, and stockholders may be unable to sell their shares on favorable terms or at all.  Investors cannot be assured of a positive return on investment or that they will not lose the entire amount of their investment in the common stock.

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Investors in the Offering will experience dilution upon the conversion of Notes and exercise of Warrants.

As a result of the issuance of the Notes and the Warrants under the Loan and Security Agreement, there are Notes and Warrants to purchase an aggregate of 350,000 shares of common stock outstanding, which if converted and exercised, respectively, could decrease the net tangible book value of your common stock.  In addition, in the Share Exchange, one of the Shareholders received warrants to purchase 624,424 shares of common stock. These warrants are exercisable at $0.01 per share.

Applicable SEC rules governing the trading of “penny stocks” limit the trading and liquidity of our common stock, which may affect the trading price of our common stock.

Shares of common stock may be considered a “penny stock” and be subject to SEC rules and regulations which impose limitations upon the manner in which such shares may be publicly traded and 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 NASD's automated quotation 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 the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market.  The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account.  In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer 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 level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules which may increase the difficulty investors may experience in attempting to liquidate such securities.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information, as of July 31, 2008 with respect to the beneficial ownership of the Company’s outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of the named executive officers, directors and director nominees; and (iii) our directors, director nominees and named executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned. Unless otherwise indicated, the address for each shareholder is c/o the Company.

Name of Beneficial Owner	Common Stock Beneficially Owned	Percentage of Common Stock Beneficially  Owned (1)
Jonathan Bomser (2)	357,508	10.8	%
Jeanne Drewsen (3)	45,000	1.5	%
Emanuel Gerard (4)	120,000	3.8	%
Renea Yamada	235,000	8	%
Diane Egger	10,000	*
Todd Bomser	-0-	n/a
Vision Opportunity Master Fund Ltd. (5) 20 West 55th Street, 5th Floor New York, New York 10019	290,576	9.9	%
Bleecker Holdings, Inc. (6) 1995 Broadway, Suite 1600 New York, NY 10023	405,000	13.8	%
DigitalFX International, Inc. (7) 3035 East Patrick Lane, Suite 9 Las Vegas, Nevada 89120	920,000	31.3	%
WF Holdings, LLC (8) 44 Easton Road Westport, CT 06880	405,000	13.8	%
All officers and directors as a group (6 persons)	767,508	24.2	%

_______________

*Less than one percent.

(1)Beneficial ownership percentages gives effect to the completion of the Share Exchange and issuance of the Notes and Warrants, and are calculated based on 2,935,112 shares of common stock issued and outstanding on July 31, 2008.  Beneficial ownership is determined in accordance with Rule 13d-3 of the Exchange Act.  The number of shares beneficially owned by a person includes shares of common stock underlying options or warrants held by that person that are currently exercisable or exercisable within 60 days of July 31, 2008.  The shares issuable pursuant to the exercise of those options or warrants are deemed outstanding for computing the percentage ownership of the person holding those options and warrants but are not deemed outstanding for the purposes of computing the percentage ownership of any other person.  The persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite that person’s name, subject to community property laws, where applicable, unless otherwise noted in the applicable footnote.  

(2)Includes 350,000 shares issuable upon exercise of options.

(3)Consists of shares issuable upon exercise of options.

(4)Consists of shares issuable upon exercise of options.

(5)Adam Benowitz and Randy Cohen share investment and dispositive power of the shares held by this entity. Does not include warrants to purchase 629,424 shares of common stock which may not be exercised if such exercise would cause this entity to hold more than 10% of the common stock of the Company.

(6)Joseph Bianco holds investment and dispositive power of the shares held by this entity.

(7)DigitalFX is a publicly traded company.

(8)Ashok Narang holds investment and dispositive power of the shares held by this entity.

19

DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Executive Officers and Directors

Below are the names and certain information regarding the Company's executive officers, directors and director nominees. Officers are elected annually by the Board of Directors. Unless otherwise indicated, each of the following officers and directors were appointed and elected on July 28, 2008.

Name	Age	Position
MJonathan Bomser	37	President, Chief Executive Officer and Director
Emanuel Gerard	75	Chairman
Jeanne Drewsen	60	Executive Vice President, Secretary and General Counsel
Renea Yamada	44	Director*
Diane Egger	43	Director*
Todd Bomser	41	Chief Financial Officer

___________________

*Previously a director of the Company. To resign upon the Company’s meeting its information obligations under the Securities Exchange Act of 1934, as amended.

Jonathan Bomser. Mr. Bomser has been President and Chief Executive Officer of CJVE since its inception in June 2007. He had been a Senior Project Manager at AOL since November 2006 where he assisted in managing the technology initiatives, creative strategies and business development for AIM Pages.com, AOL's Social Network. From 2003 to 2006 he was an Executive Producer and Founder of En Pea Productions, Inc., a television production company focused on reality television, commercials and music videos. Since May 2006, he has also been consulting for marketing, sales and creative strategies for Veoh.com (a video sharing service), and BigString.com (a publicly traded email company adding social media features to their marketing mix), Vuguru.com (Michael Eisner's production vehicle and online web presence) and others. He has served as a strategy, creative and marketing executive and consultant for other entities including Alliance Entertainment, Caroline Records, Wind Up Records, WPP, Penguin USA, Walt Disney Company, EIU.com and numerous start-ups and reorganizations. Mr. Bomser graduated from Florida International University with a Bachelor of Science in Communications in 1992.

Emanuel Gerard. Mr. Gerardcurrently serves as an advisor and investor in several private enterprises. From 2003 to 2006, Mr. Gerard served as the Vice Chairman of BMO Capital Markets. Prior thereto Mr. Gerard served as chairman of Gerard Klauer Mattison & Co., an investment banking and boutique equity research firm serving the institutional marketplace, which he founded in 1989 in New York and sold to BMO Financial Group (a subsidiary of the Bank of Montreal) in 2003. Before founding GKM, Mr. Gerard was Co-COO of Warner Communications, Inc. Mr. Gerard holds a BA from Brown University and an MBA from Harvard Business School.

Jeanne Drewsen, Before working with the founding team of C J Vision Enterprises, Inc., Jeanne Drewsen served as Executive Vice President and General Counsel of Sheridan Square Entertainment, Inc. from 2003 to 2007. In this capacity, she handled all the responsibilities of chief corporate legal officer. In addition, as head of business and legal affairs of the company’s V2 and Artemis Record labels, she was responsible for, among other things, negotiating and drafting recording, joint venture, master use, management and employment agreements, advising on legal issues involving intellectual property and employment matters and supervising A&R administration and outside counsel. She worked on contracts and other matters for such artists as White Stripes, The Raconteurs, Moby, Warren Zevon, Steve Earle, Jill Sobule, Lisa Loeb, Blood Brothers, Jesse Malin and many others. Prior to joining the Company, Ms. Drewsen was a member of the legal staff for Alliance Entertainment Corp. where she developed both legal and business expertise relating to the distribution of records produced by independent record labels. Before joining Alliance Entertainment Corp., Ms. Drewsen ran her own literary agency, Jeanne Drewsen Agency, from 1979 until 1995 where she represented the books of clients such as Newbery Honor award winner Suzanne Fisher Staples, astronaut Scott Carpenter, and journalists Thomas McNamee and William Severini Kowinski. Ms. Drewsen is a graduate of Yale Law School. She began her legal career as an associate attorney at the law firm Paul, Weiss, Rifkind, Wharton & Garrison, where she worked on corporate finance matters and corporate transactions.

Renea Yamada. Mrs. Yamada has been involved in retail management for 28 years.  From 1977-1984 and from 1997 to the present, she is the retail manager for Eggers Better Meat, in Spokane, Washington, where she is in charge of customer relations, donations and advertising, as well as managed personnel, scheduling and payroll.  In addition, she cut, prepared and packaged meat products and delivered items to customers.  From 1992-1994, Mrs. Yamada was a sales associate and retail manager for Robinson May Company in Phoenix, Arizona, where she managed inventory control and stocking, as well as resetting product displays.  Between 1994 and 1996, she was an administrative assistant with Concord Confections in Phoenix, Arizona, ordering product and handling all office functions.  From 1996 to 1997, Mrs. Yamada started and operated Eggers Produce in Spokane, Washington.  Mrs. Yamada ran significantly all operations from inventory management to selling produce to customers.

20

Diane L. Egger.  Mrs. Egger has been involved in retail sales management for 23 years.  From 1999 to the present, she is a department manager for Pumpkin Patch Grocery and Liquor, in Spokane, Washington, where she is in charge of setting sales goals, establishing new accounts, merchandizing, purchasing, inventory control, and employee training.  From 1993 to 1999, Mrs. Eggers was a supply clerk at Sacred Heart Medical Center in Spokane, Washington, where she was in charge of purchasing, and inventory control.  Between 1990 and 1993, she was a Quality Control Inspector at Miles Lavatories Holistersteer in Spokane, Washington, tracking sales and maintaining detailed product quality records and reports.  From 1990-1989, Mrs. Egger was a Department Manager overseeing and responsible for the management of three departments and the employees assigned to each department at Portland Food 4 Less in Portland Oregon.

Todd Bomser. Mr. Bomser has been our Chief Financial Officer since August 1, 2008. He is a partner in the CPA firm of Spiewak, Gottesman, Bomser & Company, P.A. located in Plantation, Florida. His experience includes business plan creation, strategic planning, financial performance modeling and analysis, cash flow management, mergers & acquisitions, Initial Public Offerings, and various general accounting and financial management activities. He has worked with public and private companies as well as franchise organizations in a variety of industries.  Mr. Bomser holds received his Bachelor of Business Administration degree in Accounting from Florida Atlantic University and his Bachelor of Science degree in Business Administration from the University of Florida.  He is a licensed CPA and is an active member of the American Institute of Certified Public Accountants (AICPA) and the Florida Institute of Certified Public Accountants (FICPA). Mr. Bomser has been retained by the Company on a part time basis and it is expected that he will spend approximately 20 hours per week working for the Company.

Family Relationships

Ms Yamada and Egger are sisters in law. Jonathan Bomser and Todd Bomser are brothers.

Employment agreement

CJVE and Jonathan Bomser entered into an employment agreement dated June 15, 2007, as amended by a first amendment to employment agreement dated January 2, 2008, pursuant to which the parties agreed that Mr. Bomser be employed as that company’s President and Chief Executive Officer. The agreement has a term of three years with automatic one year renewals unless either party notifies the other not less than 30 days prior to the expiration of the term of the agreement.

Under the terms of the agreement, Mr. Bomser is paid a base salary of $150,000 per year with a bonus to be determined at the discretion of the Company’s board of directors. Pet Express assumed the employment agreement effective on the date of the completion of the transactions contemplated in the Exchange Agreement. Under the original agreement, Mr. Bomser was entitled to 40% of the company’s option pool reserved by the board of directors for the benefit of the company’s employees; the option pool has been increased since the date of the employment agreement, and at the date of this filing, Mr. Bomser has options to purchase 290,000 shares of the common stock of Pet Express.

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

Item 3.02 Unregistered Sales of Equity Securities

See Item 2.01 above.

All securities were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended, under Section 4(2) thereunder, as they were issued in reliance on the recipients’ representation that they were accredited (as such term is defined in Regulation D), without general solicitation and represented by certificates that were imprinted with a restrictive legend. In addition, all recipients were provided with sufficient access to Company information.

Item 5.01 Changes in Control of Registrant.

See Item 2.01 above.

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

See Item 2.01 above.

21

Item 9.01 Financial Statements and Exhibits.

(a) Financial statements of business acquired.

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

FINANCIAL STATEMENTS

FOR THE PERIOD JUNE 1, 2007 (INCEPTION)

TO DECEMBER 31, 2007

TABLE OF CONTENTS

	PAGE
INDEPENDENT AUDITORS’ REPORT	3
FINANCIAL STATEMENTS
BALANCE SHEET	4
STATEMENT OF OPERATIONS	5
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY	6
STATEMENT OF CASH FLOWS	7
NOTES TO FINANCIAL STATEMENTS	8-16

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of

CJ Vision Enterprises, Inc.

(A Development Stage Company)

We have audited the accompanying balance sheet of CJ Vision Enterprises, Inc. (a development stage company) as of December 31, 2007 and the related statements of operations, stockholders' equity, and cash flows for the period June 1, 2007 (inception), to December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CJ Vision Enterprises, Inc. (a development stage company) as of December 31, 2007 and the results of its operations and its cash flows for the period from June 1, 2007 (inception), to December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2, the Company has been in the development stage since its inception on June 1, 2007. Realization of a major portion of the assets is dependent on the Company’s ability to meet its future financing requirements, and the success of future operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

		KGS LLP
	CERTIFIED PUBLIC ACCOUNTANTS
Jericho, New York July 8, 2008

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEET

AS OF DECEMBER 31, 2007

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	288,903
Prepaid expenses		8,218
TOTAL CURRENT ASSETS		297,121
OFFICE EQUIPMENT AND WEBSITE DESIGN COSTS, net		344,286
TOTAL ASSETS	$	641,407
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	43,880
COMMITMENTS AND CONTINGENCIES
SERIES A, PREFERRED STOCK, $3,000 liquidation preference 8% cumulative annual dividend, authorized 1,000 shares, issued and outstanding 72 shares		216,000
STOCKHOLDERS’ EQUITY (1)
Preferred stock, $0.001 par value, authorized 4,999,000 shares : none issued		0
Common stock, $0.01 par value, authorized 5,000,000 shares, issued and outstanding 1,980,000 shares		19,800
Additional paid-in capital		1,503,998
Deficit accumulated during the development stage		(1,142,271	)
TOTAL STOCKHOLDERS’ EQUITY		381,527
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	641,407

⁽¹⁾ Share amounts and per share data have been retroactively restated to reflect a stock split effected January 10, 2008 for each share of common stock.

The accompanying notes are an integral part of these financial statements.

- 4 -

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF OPERATIONS

FOR THE PERIOD JUNE 1, 2007 (INCEPTION) TO DECEMBER 31, 2007

REVENUES
Other income	$	1,699
TOTAL REVENUES		1,699
EXPENSES
Operating expenses		1,029,160
Administrative expenses		90,705
Depreciation and amortization		27,801
TOTAL EXPENSES		1,147,666
LOSS FROM OPERATIONS		(1,145,967	)
INTEREST INCOME		23,494
NET LOSS	$	(1,122,473	)

The accompanying notes are an integral part of these financial statements.

- 5-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE PERIOD JUNE 1, 2007 (INCEPTION) TO DECEMBER 31, 2007

	Common Stock		Additional Paid-In Capital		Accumulated Deficit			Total
ISSUANCE OF COMMONSTOCK	$	2	$	1,503,998	$	-		$	1,504,000
STOCK SPLIT - JANUARY 10, 2008		19,798		-		(19,798	)		-
NET LOSS		-		-		(1,122,473	)		(1,122,473	)
BALANCE- END	$	19,800	$	1,503,998	$	(1,142,271	)	$	381,527

The accompanying notes are an integral part of these financial statements.

- 6-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CASH FLOWS

FOR THE PERIOD JUNE 1, 2007 (INCEPTION) TO DECEMBER 31, 2007

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,122,473	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Depreciation and amortization		27,801
Increase in prepaid expenses		(8,218	)
Increase in accounts payable and accrued expenses		43,880
Net cash used by operating activities		(1,059,010	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of office equipment		(93,029	)
Costs of website design		(279,058	)
Net cash used by investing activities		(372,087	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of preferred stock		216,000
Proceeds from issuance of common stock		1,504,000
Net cash provided by financing activities		1,720,000
Net increase in cash		288,903
CASH AND CASH EQUIVALENTS - BEGINNING		-
CASH AND CASH EQUIVALENTS - END	$	288,903

The accompanying notes are an integral part of these financial statements.

- 7-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2007 

NOTE 1: ORGANIZATION AND NATURE OF BUSINESS

CJ Vision Enterprises, Inc. (the “Company”) was formed on June 1, 2007 to conduct a business as a web commerce merchant through "WOOZYFLY.com" which is an internet music site and a social networking service that allows members to create unique personal profiles online in order to find and communicate with old and new friends, and to listen to and play music.

NOTE 2: DEVELOPMENT STAGE OPERATIONS

The Company has been in the development stage since its formation on June 1, 2007. The Company initially issued 198 shares of common stock and 72 shares of Series A redeemable convertible preferred stock to the stockholders who contributed capital of $1,504,000 and $216,000, respectively. The common stock was subsequently split on January 10, 2008. The accompanying financials reflect the stock split and as such the authorized and outstanding common stock has been retroactively restated. The stock split was in the form of a stock dividend since par value did not change.

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of the Company is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who are responsible for their integrity and objectivity. These accounting policies are in conformity with accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Cash and Cash Equivalents

The Company considers all short-term investments purchased, with an original maturity of three months or less, to be cash equivalents. Accounts in

the Company’s banking institutions may at times exceed federally insured limits.

Advertising

Advertising costs are expensed as incurred and amounted to $30,681.

- 8-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2007 

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (continued)

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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.

Office Equipment and Website Design Costs

Office equipment is carried at cost. Depreciation is calculated using the straight line method over the estimated useful lives of the related assets ranging from 5-7 years. Expenditures for repairs and maintenance are charged to expense as incurred. Costs incurred in website design are accounted for under Emerging Issues Task Force 00-2, Accounting for Web Site Development Costs, whereby direct costs related to development and enhancement of internal use software is capitalized, and costs related to maintenance are expensed as incurred. These website development costs are amortized on a straight line basis over the estimated useful life of five years.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the net carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If such amounts are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Income Taxes

The Company accounts for income taxes according to the provisions of SFAS No. 109, Accounting for Income Taxes (“SFAS 109”). SFAS 109 requires recognition of deferred tax assets and liabilities to reflect the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some or all of the deferred tax asset will not be realized.

- 9-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2007 

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes (continued)

Based upon continued assessment of the realization of the net deferred tax asset and the initial year operating loss, the Company concluded that it was appropriate to establish a full valuation allowance for the net deferred tax asset in 2007. In future periods, the Company's earnings or losses will not be tax-effected until such time as the certainty of future tax benefits can be reasonably assured.

At December 31, 2007, the Company had a net operating loss of approximately $1,063,429 which is available to reduce taxable income if any in subsequent years and expires in 20 years.

Stock Based Compensation

The Company accounts for stock options and warrants using the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (Revised 2004), “Share-Based Payment,” (“SFAS 123(R)”). SFAS 123(R) addresses all forms of share based compensation awards including shares issued under employment stock purchase plans, stock options, restricted stock and stock appreciation rights. Under SFAS 123(R), share based payment awards will be measured at fair value on the awards grant date, based on the estimated number of awards that are expected to vest and will be reflected as compensation expense in the financial statements.

Recently Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (‘‘FASB’’) issued SFAS No. 157 (‘‘SFAS 157’’), ‘‘Fair Value Measurements.’’ Among other requirements, SFAS 157 defines fair value and establishes a framework for measuring fair value and also expands disclosure about the use of fair value to measure asset and liabilities. SFAS 157 is effective beginning the first fiscal year that begins after November 15, 2007. The Company is currently evaluating the impact of SFAS 157 on its financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”) ‘‘The Fair Value Opinion for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115’’ which permits entities to choose to measure many financial instruments and certain other items at fair value.

- 10-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2007 

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Pronouncements (continued)

The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates. A

business entity shall report unrealized gains and losses on items for which

the fair value option has been elected in earnings at each subsequent reporting date. Adoption is required for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS 159. The Company is currently evaluating the expected effect of SFAS 159 on its financial statements and is currently not yet in a position to determine such effects.

In December 2007, the Financial Accounting Standards Board (‘‘FASB’’) issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (‘‘SFAS 141(R)’’). SFAS 141(R) changes accounting for acquisitions that close beginning in 2009 in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, IPR&D and restructuring costs. More transactions and events will qualify as business combinations and will be accounted for at fair value under the new standard. SFAS 141(R) promotes greater use of fair values in financial reporting. In addition, under SFAS 141(R), changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income tax expense. Some of the changes will introduce more volatility into earnings. SFAS 141(R) is effective for fiscal years beginning on or after December 15, 2008. The Company has not yet determined the impact this standard will have on its financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (‘‘SFAS 160’’). SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests (NCI) and classified as a component of equity. This new consolidation method will significantly change the accounting for transactions with minority interest holders. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company has not yet determined the impact, if any, of SFAS 160 on its financial statements.

- 11-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Pronouncements (continued)

In December 2007, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 110 (“SAB 110”). SAB 110 amends and replaces Question 6 of Section D.2 of Topic 14, Share-Based Payment of the Staff Accounting Bulletin series. Question 6 of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the “simplified” method in developing an estimate of the expected term of “plain vanilla” share options and allows usage of that method for option grants prior to December 31, 2007. SAB 110 allows public companies which do not have sufficient historical experience to provide a reasonable estimate to continue the use of this method for estimating the expected term of “plain vanilla” share option grants after December 31, 2007. The adoption of this pronouncement by the Company has not had an effect on its financial statements.

In February 2008, the FASB issued Staff Position No. FAS 140-3, “Accounting for Transfers of Financial Assets and Repurchase Financing Transactions,” which provides guidance on accounting for a transfer of a financial asset and a repurchase financing. This accounting guidance presumes that an initial transfer of a financial asset and a repurchase financing are considered part of the same arrangement (linked transaction) under SFAS No. 140. However, if certain criteria are met, the initial transfer and repurchase financing shall be evaluated separately under SFAS No. 140. Staff Position No. FAS 140-3 will be effective for financial statements issued for fiscal years beginning after November 15, 2008, and for interim periods within those fiscal years. Early adoption is prohibited. Management is evaluating the potential effect this guidance may have on its financial condition and results of operations.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133,” (“SFAS 161”) as amended and interpreted, which requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. Disclosing the fair values of derivative instruments and their gains and losses in a tabular format provides a more complete picture of the location in an entity’s financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period.

- 12-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Pronouncements (continued)

Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early adoption is permitted, but not expected.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

NOTE 4: OFFICE EQUIPMENT AND WEBSITE DESIGN COSTS

Office equipment and website design costs consist of the following:
Equipment	$	89,316
Furniture and fixtures		3,713
Website design costs		279,058
		372,087
Less: Accumulated depreciation		27,801
Property and equipment at net book value	$	344,286
Depreciation expense was $27,801 in 2007.

NOTE 5: STOCK BASED COMPENSATION

On June 1, 2007 The Company adopted (“SFAS No. 123(R)”), ‘‘Share-Based Payment,’’ which requires the measurement and recognition of compensation cost at the fair value for all share-based payments, including stock options and stock purchased at a discount through a stock purchase plan.

The Company adopted the Stock Plan, which provides for the granting of restricted common stock of the Company and stock options (which may constitute incentive stock options or non-statutory stock options) to acquire common stock of the Company.  The purpose of the Stock Plan is to encourage employees, consultants and directors who are not employees to acquire a proprietary interest in the growth and performance of the Company.

- 13-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 5: STOCK BASED COMPENSATION (continued)

During June, 2007, the Company granted one member of the Company’s Board of Directors an option to purchase up to a total of 120,000 shares (post stock split) of common stock at a price of $1.00 per share. This option expires on June 15, 2010. Additional Members of the Board of Directors were granted options to purchase up to a total of 240,000 shares (post stock split) of common stock at a price of $2.25 per share. The Company also granted additional employees options to acquire 112,500 shares (post stock split) at an exercise price of $1.00 per share.

The Company accounted for the fair value of these options as an expense of operations resulting in a charge directly to formation and operating costs. The Company estimates that the fair value of this option is approximately $0 using a Black-Scholes option-pricing model.

NOTE 6: COMMITMENTS AND CONTINGENCIES

Leases and related party

The Company subleases its office facilities from a related party for a twelve month period commencing December 1, 2007 and expiring November 30, 2008 at a minimum rental of $13,000 per month. Prior to December 1, 2007, the Company was renting on a month to month basis from a Board member and related party and paid $61,765 in rent. Rent expense charged to operations in 2007 was $ 74,765. Minimum future rentals are as follows:

Year		Amount
2008	$	143,000

Commitments

The Company entered into an employment contract with its president that provides for a base annual salary, bonuses based on the Company's discretion and stock options of 120,000 shares (post stock split) at $1.00 per share for a period of three years but can be terminated after one year with notice. At December 31, 2007, the total commitment through June 15, 2010, excluding bonus was $450,000.

The Company entered into an agreement with a company owned by a Board member whereby that company would allow CJ Vision Enterprises, Inc. use of their recording studio and engineers at agreed upon times in exchange for reimbursement of out of pocket costs, promotion rights, and a future split on revenue, if any. The agreement was amended, on January 10, 2008, to

- 14-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2007 

NOTE 6: COMMITMENTS AND CONTINGENCIES (continued)

Commitments (continued)

provide the Company with 100 recording sessions at a rate of $2,000 per session through December 31, 2008.  Subsequent to year end the Company issued 60,060 shares of Common Stock in lieu of payment. (See Note 8)

Additional options were granted to other original employees of the Company in June of 2007 of 105,000 shares (post stock split) at $1.00 per share and director options of 240,000 shares (post stock split) at $2.25 per share.

NOTE 7: PREFERRED STOCK AND DIVIDEND

The Company’s Series A Preferred Stock has a stated value of $3,000, accrues dividends at a rate of 8% per annum payable quarterly in arrears cumulatively, has a liquidation preference of $3,000 per share plus accrued and unpaid dividends (the "Series A Liquidation Preference") and entitles the holder thereof to the number of votes equal to the number of common shares into which such shares of Series A Preferred Stock is convertible, determined by dividing such share’s Series A Preferred Liquidation Amount by such share’s then Conversion Price per outstanding share, voting together as a class with the holders of shares of outstanding common shares (and any other series or classes entitled to vote therewith) on all matters submitted for a stockholder vote. The Conversion Price shall be adjusted proportionately if the Company subdivides the outstanding common shares or issues a dividend on its outstanding common shares payable in common shares. The Series A Preferred Stock is redeemable at the Series A Liquidation Preference (I) at the holder's option, after January 1, 2008, and (ii) at the Company's option, after June 1, 2012. Prior to the stock split on January 10, 2008 each share of Series A Preferred Stock was convertible into one share of the Company’s common share; thereafter each share is convertible into 10,000 common shares. At December 31, 2007, cumulative preferred stock dividends in arrears amounted to $8,640.

NOTE 8: SUBSEQUENT EVENTS

On January 10, 2008, the Company did a 10,000:1 stock split. For accounting purposes, the stock split was treated as a large stock dividend. As stated previously, the accompanying statements retroactively reflect this stock split. The Company also granted certain options to employees, directors, and consultants amounting to 274,835 shares (post split shares) at varying prices.

- 15-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2007

NOTE 8: SUBSEQUENT EVENTS (continued)

During 2008 the Company sold 172,044 common shares at $3.33 for a total of $572,907.

A loan of $297,504 was made to the Company. In addition, loans of $350,000 were issued to the Company which are convertible to 87,500 shares of common stock at $4 per share. These notes are secured by the assets of the Company. Three of these loans also entitle the holders to 65,625 warrants. Upon surrender of a warrant, the holder is entitled to purchase one share of the Company’s common stock for $4. Additionally, warrants to purchase 4,511 shares of the Company common stock for $3.33 were issued.

- 16-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE PERIOD JANUARY 1, 2008

TO MARCH 31, 2008

TABLE OF CONTENTS

	PAGE
FINANCIAL STATEMENTS
BALANCE SHEET	3
STATEMENT OF OPERATIONS	4
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY	5
STATEMENT OF CASH FLOWS	6
NOTES TO FINANCIAL STATEMENTS	7-15

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEET

	As of December 31, 2007			As of March 31, 2008
				(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	288,903		$	2,594
Accounts receivable		-			2,906
Prepaid expenses		8,218			5,624
TOTAL CURRENT ASSETS		297,121			11,124
OFFICE EQUIPMENT AND WEBSITE DESIGN COSTS, net		344,286			348,406
TOTAL ASSETS	$	641,407		$	359,530
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	43,880		$	106,663
Loans payables		-			209,020
TOTAL CURRENT LIABILITIES		43,880			315,683
COMMITMENTS AND CONTINGENCIES
SERIES A, PREFERRED STOCK, $3000 liquidation preference 8% cumulative annual dividend, authorized 1000 shares, issued and outstanding 72 shares		216,000			216,000
STOCKHOLDERS’ EQUITY (1)
Preferred stock, $0.01 par value, authorized 4,999,000 shares: none issued		0			0
Common stock, $0.01 par value, authorized 5,000,000 shares, issued and outstanding 1,980,000 and 2,031,900 shares, respectively		19,800			20,319
Additional paid-in capital		1,503,998			1,676,459
Deficit accumulated during the development stage		(1,142,271	)		(1,868,931	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		381,527			(172,153	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	641,407		$	359,530

See accompanying notes.

-3-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF OPERATIONS

	Three Months Ended March 31, 2008
	(unaudited)
REVENUES
Other income	$	1,413
TOTAL REVENUES		1,413
EXPENSES
Operating expenses		582,259
Administrative expenses		141,776
Depreciation and amortization		4,598
TOTAL EXPENSES		728,633
LOSS FROM OPERATIONS		(727,220	)
INTEREST INCOME		560
NET LOSS	$	(726,660	)

See accompanying notes.

-4-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS’ EQUITY

For the Three Months Ended March 31, 2008 (Unaudited)

	Common Stock		Additional Paid-In Capital		Accumulated Deficit			Total
BALANCE - BEGINNING		19,800		1,503,998	$	(1,142,271	)	$	381,527
SALE OF STOCK		519		172,461					172,980
NET LOSS						(726,660	)		(726,660	)
BALANCE - END	$	20,319	$	1,676,459	$	(1,868,931	)	$	(172,153	)

See accompanying notes.

-5-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CASH FLOWS

	Three Months Ended March 31, 2008
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(726,660	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Depreciation and amortization		4,598
Increase in accounts receivable		(2,906	)
Decrease in prepaid expenses		2,595
Increase in accounts payable and accrued expenses		62,783
Increase in loans payable		209,020
Net cash used by operating activities		(450,570	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of office equipment		(8,719	)
Net cash used by investing activities		(8,719	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		172,980
Net cash provided by financing activities		172,980
Net increase in cash		(286,309	)
CASH AND CASH EQUIVALENTS - BEGINNING		288,903
CASH AND CASH EQUIVALENTS - END	$	2,594

See accompanying notes.

-6-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (Unaudited)

MARCH 31, 2008

NOTE 1: ORGANIZATION AND NATURE OF BUSINESS

CJ Vision Enterprises, Inc. (the “Company”) was formed on June 1, 2007 to conduct a business as a web commerce merchant through "WOOZYFLY.com" which is an internet music site and a social networking service that allows members to create unique personal profiles online in order to find and communicate with old and new friends, and to listen to and play music.

NOTE 2: DEVELOPMENT STAGE OPERATIONS

The Company has been in the development stage since its formation on June 1, 2007. The Company initially issued 198 shares of common stock and 72 shares of Series A redeemable convertible preferred stock to the stockholders who contributed capital of $1,504,000 and $216,000, respectively. The common stock was subsequently split on January 10, 2008. The financials for the period ended December 31, 2007 reflected the stock split and as such the authorized and outstanding common stock had been retroactively stated. The stock split was in the form of a stock dividend since par value did not change. In January, 2008, the Company had a private offering and sold 51,946 shares at $3.33 for a total of $172,980.

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of the Company is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who are responsible for their integrity and objectivity. These accounting policies are in conformity with accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Cash and Cash Equivalents

The Company considers all short-term investments purchased, with an original maturity of three months or less, to be cash equivalents. Accounts in the Company’s banking institutions may at times exceed federally insured limits.

-7-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (Unaudited)

MARCH 31, 2008

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (continued)

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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.

Office Equipment and Website Design Costs

Office equipment is carried at cost. Depreciation is calculated using the straight line method over the estimated useful lives of the related assets ranging from 5-7 years. Expenditures for repairs and maintenance are charged to expense as incurred. Costs incurred in website design are accounted for under Emerging Issues Task Force 00-2, Accounting for Web Site Development Costs, whereby direct costs related to development and enhancement of internal use software is capitalized, and costs related to maintenance are expensed as incurred. These website development costs are amortized on a straight line basis over the estimated useful life of five years.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the net carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If such amounts are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Income Taxes

The Company accounts for income taxes according to the provisions of SFAS No. 109, Accounting for Income Taxes (“SFAS 109”). SFAS 109 requires recognition of deferred tax assets and liabilities to reflect the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some or all of the deferred tax asset will not be realized.

-8-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (Unaudited)

MARCH 31, 2008

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes (continued)

Based upon continued assessment of the realization of the net deferred tax asset and the initial year operating loss, the Company concluded that it was appropriate to establish a full valuation allowance for the net deferred tax asset in 2007. In future periods, the Company's earnings or losses will not be tax-effected until such time as the certainty of future tax benefits can be reasonably assured.

At December 31, 2007, the Company had a net operating loss of approximately $1,063,429 which is available to reduce taxable income if any in subsequent years and expires in 20 years.

Stock Based Compensation

The Company accounts for stock options and warrants using the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (Revised 2004), “Share-Based Payment,” (“SFAS 123(R)”). SFAS 123(R) addresses all forms of share based compensation awards including shares issued under employment stock purchase plans, stock options, restricted stock and stock appreciation rights. Under SFAS 123(R), share based payment awards will be measured at fair value on the awards grant date, based on the estimated number of awards that are expected to vest and will be reflected as compensation expense in the financial statements.

Advertising

Advertising costs are expensed as incurred and amounted to $3,192.

Recently Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (‘‘FASB’’) issued SFAS No. 157 (‘‘SFAS 157’’), ‘‘Fair Value Measurements.’’ Among other requirements, SFAS 157 defines fair value and establishes a framework for measuring fair value and also expands disclosure about the use of fair value to measure asset and liabilities. SFAS 157 is effective beginning the first fiscal year that begins after November 15, 2007. The Company is currently evaluating the impact of SFAS 157 on its financial position and results of operations.

-9-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (Unaudited)

MARCH 31, 2008 

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Pronouncements (continued)

In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”) ‘‘The Fair Value Opinion for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115’’ which permits entities to choose to measure many financial instruments and certain other items at fair value. The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. Adoption is required for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS 159. The Company is currently evaluating the expected effect of SFAS 159 on its financial statements and is currently not yet in a position to determine such effects.

In December 2007, the Financial Accounting Standards Board (‘‘FASB’’) issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (‘‘SFAS 141(R)’’). SFAS 141(R) changes accounting for acquisitions that close beginning in 2009 in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, IPR&D and restructuring costs. More transactions and events will qualify as business combinations and will be accounted for at fair value under the new standard. SFAS 141(R) promotes greater use of fair values in financial reporting. In addition, under SFAS 141(R), changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business ombination after the measurement period will impact income tax expense. Some of the changes will introduce more volatility into earnings. SFAS 141(R) is effective for fiscal years beginning on or after December 15, 2008. The Company has not yet determined the impact this standard will have on its financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (‘‘SFAS 160’’). SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests (NCI) and classified as a component of equity.

-10-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (Unaudited)

MARCH 31, 2008 

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Pronouncements (continued)

This new consolidation method will significantly change the accounting for transactions with minority interest holders. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company has not yet determined the impact, if any, of SFAS 160 on its financial statements.

In December 2007, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 110 (“SAB 110”). SAB 110 amends and replaces Question 6 of Section D.2 of Topic 14, Share-Based Payment of the Staff Accounting Bulletin series. Question 6 of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the “simplified” method in developing an estimate of the expected term of “plain vanilla” share options and allows usage of that method for option grants prior to December 31, 2007. SAB 110 allows public companies which do not have sufficient historical experience to provide a reasonable estimate to continue the use of this method for estimating the expected term of “plain vanilla” share option grants after December 31, 2007. The adoption of this pronouncement by the Company has not had an effect on its financial statements.

In February 2008, the FASB issued Staff Position No. FAS 140-3, “Accounting for Transfers of Financial Assets and Repurchase Financing Transactions,” which provides guidance on accounting for a transfer of a financial asset and a repurchase financing. This accounting guidance presumes that an initial transfer of a financial asset and a repurchase financing are considered part of the same arrangement (linked transaction) under SFAS No. 140. However, if certain criteria are met, the initial transfer and repurchase financing shall be evaluated separately under SFAS No. 140. Staff Position No. FAS 140-3 will be effective for financial statements issued for fiscal years beginning after November 15, 2008, and for interim periods within those fiscal years. Early adoption is prohibited. Management is evaluating the potential effect this guidance may have on its financial condition and results of operations.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133,” (“SFAS 161”) as amended and interpreted, which requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting.

-11-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (Unaudited)

MARCH 31, 2008

NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (continued)

Recently Issued Accounting Pronouncements (continued)

Disclosing the fair values of derivative instruments and their gains and losses in a tabular format provides a more complete picture of the location in an entity’s financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early adoption is permitted, but not expected.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

NOTE 4: OFFICE EQUIPMENT AND WEBSITE DESIGN COSTS

Office equipment and website design costs consist of the following:

Equipment	$	98,035
Furniture and fixtures		3,713
Website design costs		279,058
		380,806
Less: Accumulated depreciation		32,400
Property and equipment at net book value	$	348,406

Depreciation expense was $4,598 for the three month ended March 31, 2008.

NOTE 5: STOCK BASED COMPENSATION

On June 1, 2007 The Company adopted (“SFAS No. 123(R)”), ‘‘Share-Based Payment,’’ which requires the measurement and recognition of compensation cost at the fair value for all share-based payments, including stock options and stock purchased at a discount through a stock purchase plan.

-12-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (Unaudited)

MARCH 31, 2008 

NOTE 5: STOCK BASED COMPENSATION (continued)

The Company adopted the Stock Plan, which provides for the granting of restricted common stock of the Company and stock options (which may constitute incentive stock options or non-statutory stock options) to acquire common stock of the Company.  The purpose of the Stock Plan is to encourage employees, consultants and directors who are not employees to acquire a proprietary interest in the growth and performance of the Company.

During June, 2007, the Company granted one member of the Company’s Board of Directors an option to purchase up to a total of 120,000 shares (post stock split) of common stock at a price of $1.00 per share. This option expires on June 15, 2010. Additional members of the Board of Directors were granted options to purchase up to a total of 240,000 shares (post stock split) of common stock at a price of $2.25 per share.The Company also granted additional employees options to acquire 112,500 shares (post stock split) at an exercise price of $1.00 per share. In January, 2008, the Company also granted certain options to employees, directors, and consultants amounting to 274,835 shares at varying prices.

The Company accounted for the fair value of these options as an expense of operations resulting in a charge directly to formation and operating costs. The Company estimates that the fair value of this option is approximately $0 using a Black-Scholes option-pricing model.

NOTE 6: COMMITMENTS AND CONTINGENCIES

Leases and related party

The Company subleases its office facilities from a related party for a twelve month period commencing December 1, 2007 and expiring November 30, 2008 at a minimum rental of $13,000 per month. Rent expense charged to operations for the three month ended march 31, 2008 was $ 28,038. Minimum future rentals are as follows:

Year	Amount
2008	$	104,000

-13-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (Unaudited)

MARCH 31, 2008

NOTE 6: COMMITMENTS AND CONTINGENCIES (continued)

Commitments

The Company entered into an employment contract with its president that provides for a base annual salary, bonuses based on the Company's discretion and stock options of 120,000 shares (post stock split) at $1.00 per share for a period of three years but can be terminated after one year with notice. At March 31, 2008, the total commitment through June 15, 2010, excluding bonus was $450,000.

The Company entered into an agreement with a company owned by a Board member whereby that company would allow CJ Vision Enterprises, Inc. use of their recording studio and engineers at agreed upon times in exchange for reimbursement of out of pocket costs, promotion rights, and a future split on

Revenue, if any. The agreement was amended, on January 10, 2008, to provide the Company with 100 recording sessions at a rate of $2,000 per session through December 31, 2008.  Subsequent to March 31,2007, the Company issued 60,060 shares of Common Stock in lieu of payment.

Additional options were granted to other original employees of the Company in June of 2007 of 105,000 shares (post stock split) at $1.00 per share and director options of 240,000 shares (post stock split) at $2.25 per share. In January, 2008, the Company also granted certain options to employees, directors, and consultants amounting to 274,835 shares (post split shares) at varying prices.

NOTE 7: PREFERRED STOCK AND DIVIDEND

The Company’s Series A Preferred Stock has a stated value of $3,000, accrues dividends at a rate of 8% per annum payable quarterly in arrears cumulatively, has a liquidation preference of $3,000 per share plus accrued and unpaid dividends (the "Series A Liquidation Preference") and entitles the holder thereof to the number of votes equal to the number of common shares into which such shares of Series A Preferred Stock is convertible, determined by dividing such share’s Series A Preferred Liquidation Amount by such share’s then Conversion Price per outstanding share, voting together as a class with the holders of shares of outstanding common shares (and any other series or classes entitled to vote therewith) on all matters submitted for a stockholder vote. The Conversion Price shall be adjusted proportionately if the Company subdivides the outstanding common shares or issues a dividend on its outstanding common shares payable in common shares. The Series A Preferred Stock is redeemable at the Series A Liquidation Preference (i) at the holder's option, after January 1, 2008, and (ii) at the Company's option, after June 1, 2012. Prior to the stock split on January 10, 2008 each share of Series A Preferred Stock was convertible into one share of the Company’s common share; thereafter each share is convertible into 10,000 common shares. At December 31, 2007, cumulative preferred stock dividends in arrears amounted to $8,640.

-14-

CJ VISION ENTERPRISES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (Unaudited)

MARCH 31, 2008 

NOTE 8: SUBSEQUENT EVENTS

The Company also granted certain options to employees, directors, and consultants amounting to 274,835 shares (post split shares) at varying prices. Subsequent to March 31, 2008, the Company sold an additional 120,098 shares at $3.33 for a total of $399,927.

A loan of $297,504 was made to the Company.  In addition, loans of $350,000 were issued to the Company which are convertible to 87,500 shares of common stock at $4 per share.  Three of these loans also entitle the holders to 65,625 warrants.  Upon surrender of a warrant, the holder is entitled to purchase one share of the Company’s common stock for $4.

-15-

(b) Pro forma financial information.

Not applicable.

(c) Exhibits

Exhibit Number	Description
2.1	Share Exchange Agreement
4.1	Form of Warrant
4.2	Form of Note
10.1	Loan and Security Agreement
10.2	Employment Agreement between CJ Vision Enterprises, Inc. and Jonathan Bomser
10.3	Sublease Agreement between JSM Music, Inc. and CJ Vision Enterprises, Inc.
10.4	Executive Compensation Agreement dated July 28, 2008 between the Company and Jonathan Bomser
10.5	Employment Agreement between the Company and Todd Bomser
10.6	Consulting Agreement between the Company and Spiewak, Gottesman et al.

22

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: August 1, 2008

PET EXPRESS SUPPLY, INC.
	/s/ Todd Bomser
	By:  Todd Bomser
	Chief Financial Officer

EX-2.1

EXCHANGE AGREEMENT

THIS EXCHANGE AGREEMENT (“Agreement”), is made and entered into as of the 25^th day of July, 2008 by and among PET EXPRESS SUPPLY, INC., a Nevada corporation (“PETX”); C J VISION ENTERPRISES, INC., a Delaware corporation, d/b/a “Woozyfly.com” (“CJVE”); RENEA YAMADA, an individual (“Yamada”); DIGITAL FX INTERNATIONAL, INC. (“DFX”), VISION OPPORTUNITY MASTER FUND, LTD. (“Vision”), BLEECKER HOLDINGS, INC. (“BHI”); WF HOLDINGS, LLC (“WFH”); CORPORATE COMMUNICATIONS NETWORK, INC. (“CCN”); LYNN COLE CAPITAL CORP. (“LCCC”); MKM OPPORTUNITY MASTER FUND, LTD. (“MKM”); PETER NEWMAN; and those Persons who have executed or shall subsequently execute this Agreement under the heading “Additional CJVE Stockholders”. DFX, Vision, BHI and WHF are sometimes collectively referred to herein as the “CJVE Principal Stockholders” and Yamada is sometimes referred to herein as the “PETX Principal Stockholder”. CCN, LCCC,and MKM are sometimes collectively referred to herein as the “CJVE Convertible Noteholders”.

RECITALS:

A.PETX desires to acquire all of the issued and outstanding capital stock of CJVE, through an exchange (the “Share Exchange”) of PETX common stock for 100% of the outstanding common stock of CJVE and an exchange (the “Note Exchange”) of PETX notes for 100% of the outstanding notes of CJVE.

B.It is the intention of the Parties hereto that the exchange of securities hereunder shall qualify as transactions in securities exempt from registration or qualification under the Securities Act of 1933, as amended, and under the applicable securities laws of each state or jurisdiction where the CJVE securities holders reside.

C.PETX and CJVE desire to issue convertible promissory notes to lenders, including CCN, LCCC,and MKM, who shall, on the Closing Date or as promptly as possible thereafter, loan to PETX (the “Loan Transaction”) up to$5,000,000 pursuant to the Loan Agreement attached hereto as Exhibit A (the “Loan Agreement”).

D.The board of directors of each of PETX and CJVE, and the PETX Principal Stockholder and the CJVE Principal Stockholders each deem it to be in the best interests of PETXand CJVE and their respective shareholders to consummate the Share Exchange and the Note Exchange, as a result of which: (i) PETX shall acquire all of the issued and outstanding shares of CJVE Common Stock, and (ii) the holders of 100% of the issued and outstanding shares of CJVE Common Stock shall be issued the “Exchange Shares” (as hereinafter defined), to represent a substantial majority of the “PETX Fully-Diluted Common Stock” (as hereinafter defined).

NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained in this Agreement, the Parties hereto agree as follows:

1

DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set forth below:

“Additional CJVE Stockholders” shall mean the Persons, other than the CJVE Principal Stockholders, who are holders of all of the issued and outstanding shares of CJVE Common Stock as at the Closing Date that are not owned of record by the CJVE Principal Stockholders.

“Affiliate” means any one or more Person controlling, controlled by or under common control with any other Person or their affiliate.

“Applicable Law” means any domestic or foreign law, statute, regulation, rule, policy, guideline or ordinance applicable to the businesses of the Parties, the Share Exchange and/or the Parties.

“Business Day” shall mean any day, excluding Saturday, Sunday and any other day on which national banks located in New York, New York shall be closed for business.

“CJVE Common Stock” means the 5,000,000 Common Shares, $0.01 par value per share, of CJVE authorized pursuant to its certificate of incorporation, as amended, through the Closing Date.

“CJVE Common Stockholders” means the collective reference to the holders of CJVE Common Stock.

“CJVE Convertible Noteholders” means the collective reference to CCN, LCCC,and MKM, the holders of the CJVE Convertible Notes.

“CJVE Convertible Notes” shall mean all of the CJVE Convertible Promissory Notes issued and outstanding at the Closing Date, all of which are listed on Schedule 2.11 attached hereto.

“CJVE Newman Note” shall mean the CJVE non-convertible note issued by CJVE to Peter Newman, outstanding at the Closing Date, and described in Schedule 2.11 attached hereto.

“CJVE Options” shall mean options to purchase an aggregate of up to 739,835 shares of CJVE Common Stock that are outstanding as at the Closing Date and are being exchanged for an equal number of PETX options.

“CJVE Preferred Stock” shall mean the 2,000,000 shares of preferred stock, par value $0.001 per share, authorized for issuance under the CJVE Certificate of Incorporation, and designated as New Series A Redeemable Convertible Preferred Stock.

“CJVE Stockholder Parties” shall mean the collective reference to the CJVE Principal Stockholders and the Additional CJVE Stockholders.

“CJVE Security Holders” shall mean the CJVE Stockholder Parties, the CJVE Convertible Noteholders, Newman, and the holders of the CJVE Options and the CJVE Warrants.

“CJVE Warrants” shall mean the following warrants that are outstanding as at the Closing Date, and are being exchanged for Exchange Warrants of PETX as provided hereunder (i) the Vision Warrant and (ii) the other issued and outstanding CJVE Warrants to purchase 69,085 shares of CJVE Common Stock.

“Closing Date” shall mean the date upon which the Share Exchange shall be consummated.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

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“Exchange Notes” shall mean aggregate principal amount of $350,000 of 6% Convertible Notes of PETX, which shall have the same terms the terms of the 6% Convertible Notes issued by PETX pursuant to the Loan Agreement.

“Exchange Shares” shall mean the collective reference to the shares of PETXCommon Stock to be issued to the CJVE Stockholder Parties on the Closing Date.

“Exchange Warrants” shall mean warrants to purchase shares of PETX issued to the holders of CJVE Warrants as provided in Section 1.1(d) hereof, including (i) the Vision Warrant, and (ii) the warrants being issued to all holders of CJVE Warrants other than Vision, which shall have the same terms as the warrants issued by PETX pursuant to the Loan Agreement.

“GAAP” means generally accepted accounting principles in the United States of America as promulgated by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board or any successor Institutes concerning the treatment of any accounting matter.

“Knowledge” means the knowledge after reasonable inquiry.

“Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance or other adverse claim of any kind in respect of such property or asset.

“Material Adverse Effect” with respect to any entity or group of entities means any event, change or effect that has or would have a materially adverse effect on the financial condition, business or results of operations of such entity or group of entities, taken as a consolidated whole.

“Person” means any individual, corporation, partnership, trust or unincorporated organization or a government or any agency or political subdivision thereof.

“PETX Common Stock” shall mean the 100,000,000 shares of common stock of PETX, $0.001 par value per share, authorized pursuant to the Articles of Incorporation of PETX, as amended through the Closing Date.

“PETX Fully-Diluted Common Stock” means the maximum number of shares of PETX Common Stock that are issued and outstanding immediately after the Closing (but prior to the consummation of the Loan Transaction), after giving effect to the following transactions described in Article One of this Agreement:

(a)the return to the treasury of PETX for cancellation that number of shares of PETX Common Stock owned by the PETX Principal Stockholder as is specified in Section 1.1 hereof, such that there shall be 700,000 shares of PETX Common Stock outstanding on the Closing Date;

(b)the issuance of all 2,235,112 Exchange Shares to the CJVE Stockholder Parties on the Closing Date;

(c)the issuance of up to 87,500 shares of PETX Common Stock that are issuable upon conversion of all Exchange Notes issued to the CJVE Noteholders on the Closing Date;

(d)the issuance of up to 69,085 shares of PETX Common Stock that are issuable upon the exercise of all warrants to purchase PETX Common Stock that are exchanged for warrants to purchase shares of CJVE Common Stock hereunder on the Closing Date;

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(e) the issuance of up to 739,835 shares of PETX Common Stock that are issuable upon the exercise of all options granted on or after the Closing Date, as provided herein, in exchange for options to purchase an aggregate of up to 739,835 shares of CJVE Common Stock that are outstanding as at the Closing Date.

“PETX Securities” shall mean the Exchange Shares, the Exchange Notes, the Exchange Warrants, the note issued in exchange for the CJVE Newman Note, the options issued in exchange for the CJVE Options and the PETX Common Stock issuable upon exercise of such options and warrants and conversion of the Exchange Notes.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means:

(i) any income, alternative or add-on minimum tax, gross receipts tax, sales tax, use tax, ad valorem tax, transfer tax, franchise tax, profits tax, license tax, withholding tax, payroll tax, employment tax, excise tax, severance tax, stamp tax, occupation tax, property tax, environmental or windfall profit tax, custom, duty or other tax, impost, levy, governmental fee or other like assessment or charge of any kind whatsoever together with any interest or any penalty, addition to tax or additional amount imposed with respect thereto by any governmental or Tax authority responsible for the imposition of any such tax (domestic or foreign), and

(ii) any liability for the payment of any amounts of the type described in clause (i) above as a result of being a member of an affiliated, consolidated, combined or unitary group for any Taxable period, and

(iii) any liability for the payment of any amounts of the type described in clauses (i) or (ii) above as a result of any express or implied obligation to indemnify any other person.

“Tax Return” means any return, declaration, form, claim for refund or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Vision Warrant” is the CJVE Warrant held by Vision at the Closing Date hereof.

ARTICLE 1

EXCHANGE OF SECURITIES

1.1Share Exchange; Warrants and Options.

(a)On or before the Closing Date and subject to and upon the terms and conditions of this Agreement, the PETX Principal Stockholder shall have contributed back to the treasury of PETX such number of the shares of PETX Common Stock then owned by the PETX Principal Stockholder, that the aggregate number of shares of PETX Common Stock issued and outstanding at the Closing Date, prior to the issuance of Exchange Shares, is 700,000 shares of PETX Common Stock.

(b)On the Closing Date and subject to and upon the terms and conditions of this Agreement:

the CJVE StockholderParties shall sell, assign, transfer and exchange (collectively, “Transfer”) to PETX all of the issued and outstanding shares of CJVE Common Stock and CJVE Preferred Stock owned of record on the Closing Date by them.

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(c)On the Closing Date, and in exchange for the Transfer to it of the shares of CJVE Common Stock and CJVE Preferred Stock, PETX shall issue to the CJVE Stockholder Parties the following Exchange Shares:

(i)the CJVE Common Stockholders shall receive an aggregate of 1,515,112shares of PETX Common Stock;

(ii)the holder of CJVE Preferred Stock shall receive 720,000 shares of PETX Common Stock;

(d)On the Closing Date, each of the holders of CJVE Warrants shall surrender their CJVE Warrant back to the treasury of CJVE, and in exchange:

(i)PETX shall issue to Vision a warrant to purchase 629,424 shares of PETX Common Stock, in substantially the form of Exhibit B attached hereto; and

(ii)PETX shall issue to the holders of CJVE Warrants other than Vision Exchange Warrantsto purchase 69,085 shares of PETX Common Stock;

(e)As soon as practicable after the Closing Date, any options entitling the holder to purchase shares of CJVE Common Stock as at the Closing Date shall be exchanged for a like number of options to purchase shares of PETX Common Stock, at the purchase price set forth in the respective options when originally granted.

1.2Exchange Notes; Newman Note. In connection with the transactions contemplated by this Agreement, on the Closing Date:

(a)Each CJVE Convertible Note, including any accrued and unpaid interest thereon, shall be returned to the treasury of CJVE for cancellation and in exchange, PETX shall issue to each of the CJVE Convertible Noteholders an Exchange Note, in principal amount equal to the principal amount of the CJVE Convertible Note being exchanged. The accrued interest on each of the CJVE Convertible Notes shall be paid to the holder in cash by PETX within 5 business days following the Closing Date.

(b)The CJVE Newman Note, including any accrued and unpaid interest thereon, shall be returned to the treasury of CJVE for cancellation and in exchange, PETX shall issue to the holder thereof a non-convertible note of PETX, including substantially similar terms with respect to principal amount, interest, maturity, and mandatory prepayment as are contained in the CJVE Newman Note, and accrued interest shall be added to the principal of such note issued by PETX.

1.3Exemption from Registration. The Parties intend that the Exchange Shares to be issued by PETX to the CJVE Principal Stockholders and the Additional CJVE Stockholders shall be exempt from the registration requirements of the Securities Act pursuant to Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder.

1.4Closing. The closing of the Share Exchange and the Note Exchange (the “Closing”) will take place at such date as PETX and the CJVE Principal Stockholders shall agree (the “Closing Date”).

1.5Stock Certificates. At the Closing, the CJVE Stockholder Parties shall deliver the certificates representing the CJVE Shares and the shares of CJVE Preferred Stock held by the CJVE Stockholder Parties Stockholders, duly endorsed (or with executed stock powers) so as to make PETX the sole owner thereof, and PETX shall issue to the CJVE Stockholder Parties all of the Exchange Shares issuable pursuant to this Agreement. Until so surrendered, each outstanding certificate which, prior to the Closing Date, represented CJVE Shares shall be deemed for all corporate purposes, subject to the further provisions of this Article I, to evidence the ownership of the number of whole Exchange Shares for which such CJVE Shares have been so exchanged. No dividend payable to holders of Exchange Shares of record as of any date subsequent to the Closing Date shall be paid to the owner of any certificate which, prior to the Closing Date, represented CJVE Shares, until such certificate or certificates representing all the relevant CJVE Shares, together with a stock transfer form, are surrendered as provided in this Article 1. All Exchange Shares for which the CJVE Shares shall have been exchanged pursuant to this Article I shall be deemed to have been issued in full satisfaction of all rights pertaining to such CJVE Shares.

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1.6Restrictions On Resale

PETX intends to issue the PETX Securities without registration under the Securities Act or qualification under any state securities law, andnone of the PETX Securities may be transferred, hypothecated, sold or otherwise disposed of until: (i) a registration statement with respect to such securities is declared effective under the Securities Act, or (ii) PETX receives an opinion of counsel for the stockholder, reasonably satisfactory to counsel for PETX, that an exemption from the registration requirements of the Securities Act is available.

The certificates representing the PETX Securities shall contain a legend substantially as follows:

“THE SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER SUCH ACT, OR PET EXPRESS SUPPLY, INC. RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY TO COUNSEL FOR PET EXPRESS SUPPLY, INC. THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.”

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF

CJVE AND THE CJVE STOCKHOLDER PARTIES.

Each of (i) CJVE hereby represents and warrants to PETX, and (ii) solely as to Section 2.1(b) below, the CJVE Stockholder Parties, severally and not jointly and severally, represent and warrant to PETX, as follows:

2.1Organization and Good Standing; Authority.

(a)CJVE is a corporation duly organized and validly existing under the laws of the State of Delaware.

(b)Each of the CJVE Stockholder Parties individually has the power and authority to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transaction contemplated hereby is hereby authorized by the CJVE Stockholder Party. The execution and performance of this Agreement will not constitute a material breach of any agreement, indenture, mortgage, license or other instrument or document to which the CJVE Stockholder Party is a party and will not violate any judgment, decree, order, writ, rule, statute, or regulation applicable to such CJVE Stockholder Party or its properties. Each of the CJVE Stockholder Parties is the owner of record and beneficially of all of the issued and outstanding shares of CJVE Common Stock or CJVE Preferred Stock (collectively, “CJVE Securities”) set forth on Schedule 2.3, which CJVE Securities are owned free and clear of all rights, claims, liens and encumbrances, and have not been sold, pledged, assigned or otherwise transferred except pursuant to this Agreement.

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(c)CJVE has the corporate power to enter into this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of CJVE. The execution and performance of this Agreement will not constitute a material breach of any agreement, indenture, mortgage, license or other instrument or document to which CJVE is a party and will not violate any judgment, decree, order, writ, rule, statute, or regulation applicable to CJVE or its properties. The execution and performance of this Agreement will not violate or conflict with any provision of the respective Certificate of incorporation or by-laws of CJVE.

2.2Capitalization. On the Closing Date, the authorized capital stock of CJVE consists of 5,000,000 shares of CJVE Common Stock, and 5,000,000 shares of CJVE Preferred Stock, of which (a) an aggregate of 1,515,112 shares of CJVE Common Stock and 72 shares of CJVE Preferred Stock are issued and outstanding. Except as set forth on Schedule 2.2, CJVE has not granted, issued or agreed to grant, issue or make any warrants, options, subscription rights or any other commitments of any character relating to the issued or unissued shares of capital stock of CJVE.

2.3Ownership of CJVE Shares.The CJVE Stockholder Parties set forth on Schedule 2.3 are the owners of record and beneficially of all of the issued and outstanding shares of CJVE Common Stock, CJVE Preferred Stock (collectively, “CJVE Securities”) set forth on Schedule 2.3, which CJVE Securities, to the best of CJVE’s knowledge, are owned free and clear of all rights, claims, liens and encumbrances, and have not been sold, pledged, assigned or otherwise transferred except pursuant to this Agreement.

2.4Financial Statements, Books and Records.Schedule 2.4 consists of (a) the audited financial statements (balance sheet, income statement, notes) of CJVE as of December 31, 2007 and for the fiscal year then ended (the “Annual Financial Statements”), and (b) the unaudited financial statements of CJVE as of March 31, 2008 and for the three months then ended (the “Interim 2008 Financial Statements” and together with the Annual Financial Statements, the “Financial Statements”). The Financial Statements fairly represent the financial position of CJVE as at such dates and the results of their operations for the periods then ended. The Financial Statements were prepared in accordance with generally accepted accounting principles applied on a consistent basis with prior periods except as otherwise stated therein and except that the Interim 2008 Financial Statements may not include all footnotes normally included under such generally accepted accounting principles. The books of account and other financial records of CJVE are in all respects complete and correct in all material respects and are maintained in accordance with good business and accounting practices.

2.5Access to Records; Form 8K. The corporate financial records, minute books and other documents and records of CJVE have been made available to PETX prior to the Closing hereof. The draft of the Form 8K to be filed by PETX with the Securities Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, which has been prepared by CJVE and made available to PETX prior to the Closing hereof, is complete and correct in all material respects.

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2.6No Material Adverse Changes. Except as set forth on Schedule 2.6, since March 31, 2008 there has not been:

(a)any material adverse change in the financial position of CJVE except changes arising in the ordinary course of business, which changes will in no event materially and adversely affect the financial position of CJVE;

(b)any damage, destruction or loss materially affecting the assets, prospective business, operations or condition (financial or otherwise) of CJVE whether or not covered by insurance;

(c)any declaration, setting aside or payment of any dividend or distribution with respect to any redemption or repurchase of CJVE capital stock;

(d)any sale of an asset (other than in the ordinary course of business) or any mortgage or pledge by CJVE of any properties or assets; or

(e)adoption of any pension, profit sharing, retirement, stock bonus, stock option or similar plan or arrangement.

2.7Taxes.CJVE as of December 31, 2007, has filed all material tax, governmental and/or related forms and reports (or extensions thereof) due or required to be filed and has (or will have) paid or made adequate provisions for all taxes or assessments which had become due as of December 31, 2007, and there are no deficiency notices outstanding.

2.8Compliance with Laws. To the best of CJVE’s knowledge, CJVE has complied with all federal, state, county and local laws, ordinances, regulations, inspections, orders, judgments, injunctions, awards or decrees applicable to it or its business which, if not complied with, would materially and adversely affect the business of CJVE.

2.9No Breach. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not:

(a) violate any provision of the certificate of incorporation or By-Laws of CJVE;

(b) violate, conflict with or result in the breach of any of the terms of, result in a material modification of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time, or both constitute) a default under any contract or other agreement to which CJVE is a party or by or to which it or any of its assets or properties may be bound or subject;

(c) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, CJVE or upon the properties or business of CJVE; or

(d)violate any statute, law or regulation of any jurisdiction applicable to the transactions contemplated herein which could have a materially adverse effect on the business or operations of CJVE.

2.10Actions and Proceedings.CJVE is not a party to any material pending litigation or, to its knowledge, any governmental investigation or proceeding not reflected in the CJVE Financial Statements, and to its best knowledge, no material litigation, claims, assessments or Non-governmental proceedings are threatened against CJVE.

2.11Material Contracts; Real Estate. Schedule 2.11 sets forth any material contract or arrangement to which CJVE is a party or by or to which it or its assets, properties or business are bound or subject. Except as set forth on Schedule 2.11, CJVE owns no real property nor is a party to any leasehold agreement.

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2.12Brokers or Finders. No broker’s or finder’s fee will be payable by CJVE in connection with the transactions contemplated by this Agreement, nor will any such fee be incurred as a result of any actions by CJVE or any of the CJVE Stockholder Parties.

2.13Assets.CJVE holds all rights, title and interest in its material assets free and clear of all liens, pledges, mortgages, security interests, conditional sales contracts or any other encumbrances, except as set forth on Schedule 2.13 hereto.

2.14Liabilities.CJVE did not have any direct or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, known or unknown, fixed or unfixed, liquidated or unliquidated, secured or unsecured, accrued or absolute, contingent or otherwise, including, without limitation, any liability on account of taxes, any governmental charge or lawsuit (all of the foregoing collectively defined to as “Liabilities”), which are not fully, fairly and adequately reflected on the Financial Statement except for a specific Liabilities set forth in the Unaudited Financial Statements or on Schedule 2.14 attached hereto and made a part hereof. As of the date of Closing, CJVE will not have any Liabilities, other than Liabilities fully and adequately reflected on the Financial Statements except for Liabilities incurred in the ordinary course of business and as set forth in Schedule 2.14. There is no circumstance, condition, event or arrangement which may hereafter give rise to any Liabilities not in the ordinary course of business.

2.15Operations of CJVE. From March 31, 2008 through the Closing Date, CJVE has not and will not have:

(a)except as set forth in Schedule 2.15, declared or paid any dividend or declared or made any distribution of any kind to any shareholder, or made any direct or indirect redemption, retirement, purchase or other acquisition of any shares in its capital stock;

(c)made any loan or advance to any shareholder, officer, director, employee, consultant, agent or other representative or made any other loan or advance otherwise than in the ordinary course of business;

(d)except in the ordinary course of business, and except as set forth in Schedule 2.15 hereof, incurred or assumed any indebtedness or liability (whether or not currently due and payable);

(e)disposed of any assets of CJVE except in the ordinary course of business,;

(f)materially increased the annual level of compensation of any executive employee of CJVE;

(g)increased, terminated, amended or otherwise modified any plan for the benefit of employees of CJVE;

(h)except as set forth in Schedule 2.15 hereof, issued any equity securities or rights to acquire such equity securities; or

(i)except in the ordinary course of business, entered into or modified any contract, agreement or transaction.

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2.16Criminal or Civil Acts. For the period of five years prior to the execution of this Agreement, no executive officer, director or principal stockholder of CJVE has been convicted of a felony crime, filed for personal bankruptcy, been the subject of a Commission or NASD judgment or decree, or is currently the subject to any investigation in connection with a felony crime or Commission or NASD proceeding.

2.17Full Disclosure. No representation or warranty by CJVE in this Agreement or in any document or schedule to be delivered by them pursuant hereto, and no written statement, certificate or instrument furnished or to be furnished by CJVE pursuant hereto or in connection with the negotiation, execution or performance of this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state any fact necessary to make any statement herein or therein not materially misleading or necessary to a complete and correct presentation of all material aspects of the business of CJVE.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF

PETX AND THE PETX PRINCIPAL STOCKHOLDER

PETX and the PETX Principal Stockholder hereby jointly and severally represent and warrant to the CJVE Common Stockholders, as follows:

3.1Organization and Good Standing.PETX is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada. PETX has the corporate power to own its own property and to carry on its business as now being conducted and is duly qualified to do business in any jurisdiction where so required except where the failure to so qualify would have no material negative impact.

3.2Corporate Authority. PETX has the corporate power to enter into this Agreement and to perform their respective obligations hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of PETX as required by Nevada law. The execution and performance of this Agreement will not constitute a material breach of any agreement, indenture, mortgage, license or other instrument or document to which PETX is a party and will not violate any judgment, decree, order, writ, rule, statute, or regulation applicable to PETX or its properties. The execution and performance of this Agreement will not violate or conflict with any provision of the respective Articles of Incorporation or by-laws of PETX.

3.3PETX Capitalization. As of the date of this Agreement, PETX is authorized to issue 100,000,000 shares of PETX Common Stock, $0.001 par value per share. An aggregate of ________ shares of PETX Common Stock are issued and outstanding, of which 5,000,000 shares of PETX are owned of record and beneficially by the PETX Principal Stockholder. Except for 350,000 shares of PETX Common Stock issuable upon exercise of an outstanding warrant, no shares of PETX Common Stock are reserved for issuance pursuant to any convertible securities, options or warrants.

3.4PETX Balance Sheet; Assets and Liabilities.

(a)The Form 10KSB of PETX for the fiscal year ended December 31, 2007 includes the audited balance sheet, statement of operations and statement of cash flows of PETX as at December 31, 2007 and for the fiscal year then ended (the “PETX 2007 Audited Financial Statements”). The Form 10QSB of PETX for the quarter ended March 31, 2008, includes the unaudited balance sheet, statement of operations and statement of cash flows of PETX as at March 31, 2008 and for the three months then ended (the “PETX 2008 Financial Statements”). Except as set forth on the PETX Balance Sheet as at March 31, 2008 or otherwise disclosed on Schedule 3.4, as at March 31, 2008 and for all periods subsequent thereto, PETX has no other assets and has incurred no other liabilities, debts or obligations, whether fixed, contingent or otherwise required to be set forth on a balance sheet prepared in accordance with GAAP. The books of account and other financial records of PETX are in all respects complete and correct in all material respects and are maintained in accordance with good business and accounting practices.

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(b)Except as disclosed in its SEC filings, PETX has no operating assets or liabilities, and has not conducted any trade or business activities whatsoever. Except for this Agreement,PETX has no material contracts.

3.5No Material Adverse Changes. Since March 31, 2008:

(a)There have not been any material adverse changes in the financial position of PETX except changes arising in the ordinary course of business, which changes will in no event materially and adversely affect the financial position of PETX, and will be consistent with the representations made by PETX hereunder.

(b)there has not been any damage, destruction or loss materially affecting the assets, prospective business, operations or condition (financial or otherwise) of PETX whether or not covered by insurance;

(c)there has not been any declaration setting aside or payment of any dividend or distribution with respect to any redemption or repurchase of PETX capital stock;

(d)there has not been any sale of an asset (other than in the ordinary course of business) or any mortgage pledge by PETX of any properties or assets; or

(e)there has not been adoption or modification of any pension, profit sharing, retirement, stock bonus, stock option or similar plan or arrangement.

(f)there has not been any loan or advance to any shareholder, officer, director, employee, consultant, agent or other representative or made any other loan or advance otherwise than in the ordinary course of business;

(g)there has not been any increase in the annual level of compensation of any executive employee of PETX;

(h)except in the ordinary course of business, PETX has not entered into or modified any contract, agreement or transaction; and

(i)PETX has not issued any equity securities or rights to acquire equity securities.

3.6Taxes.PETX has timely filed all material tax, governmental and/or related forms and reports (or extensions thereof) due or required to be filed and has paid or made adequate provisions for all taxes or assessments which have become due as of the Closing Date, and there are no deficiencies outstanding.

3.7Compliance with Laws.PETX has complied with all federal, state, county and local laws, ordinances, regulations, inspections, orders, judgments, injunctions, awards or decrees applicable to it or its business, which, if not complied with, would materially and adversely affect the business of PETX or the trading market for the PETX Shares and specifically, and PETX has complied with provisions for registration under the Securities Actand all applicable blue sky laws in connection with its public stock offering and there are no outstanding, pending or threatened stop orders or other actions or investigations relating thereto.

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3.8Actions and Proceedings.PETX is not a party to any material pending litigation or, to its knowledge, any governmental proceedings are threatened against PETX.

3.9Periodic Reports.PETX is current in the filing of all forms or reports with the Securities and Exchange Commission (“SEC”), and has been a reporting company under Exchange Act. All such reports and statements filed by PETX with the SEC (collectively, “SEC Reports”) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstance under which they were made, not misleading.

3.10Disclosure.PETX has (and at the Closing it will have) disclosed in writing to CJVE all events, conditions and facts of which PETX has Knowledge affecting the business, financial conditions or results of operation of PETXthat are not set forth in PETX’s filings with the SEC and that could reasonably be expected to materially and adversely affect PETX and CJVE following the Closing.

3.11Access to Records. The corporate financial records, minute books, and other documents and records of PETX have been made available to CJVE prior to the Closing.

3.12No Breach. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not:

(a)violate, conflict with or result in the breach of any of the terms of, result in a material modification of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract or other agreement to which PETX is a party or by or to which it or any of its assets or properties may be bound or subject;

(b)violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, PETX or upon the securities, properties or business to PETX; or

(c)violate any statute, law or regulation of any jurisdiction applicable to the transactions contemplated herein.

3.14Brokers or Finders. No broker’s or finder’s fee will be payable by PETX in connection with the transactions contemplated by this Agreement, nor will any such fee be incurred as a result of any actions of PETX.

3.15Authority to Execute and Perform Agreements.PETX has the full legal right and power and all authority and approval required to enter into, execute and deliver this Agreement and to perform fully its obligations hereunder. This Agreement has been duly executed and delivered and is the valid and binding obligation of PETX enforceable in accordance with its terms, except as may be limited by bankruptcy, moratorium, insolvency or other similar laws generally affecting the enforcement of creditors’ rights. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and the performance by PETX of this Agreement, in accordance with its respective terms and conditions will not:

(a)require the approval or consent of any governmental or regulatory body or the approval or consent of any other person;

(b)conflict with or result in any breach or violation of any of the terms and conditions of, or constitute (or with any notice or lapse of time or both would constitute) a default under, any order, judgment or decree applicable to PETX, or any instrument, contract or other agreement to which PETX is a party or by or to which PETX is bound or subject; or

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(c)result in the creation of any lien or other encumbrance on the assets or properties of PETX.

3.16Criminal or Civil Acts. For the period of five years prior to the execution of this Agreement, no executive officer, director or principal stockholder of PETX has been convicted of a felony crime, filed for personal bankruptcy, been the subject of a Commission or NASD judgment or decree, or is currently the subject to any investigation in connection with a felony crime or Commission or NASD proceeding.

3.17Bulletin Board Trading Status. PETX shall be in compliance with all requirements for, and PETX Common Stock, shall continue to be quoted on, the Electronic Bulletin Board on the Closing Date, such that the PETXCommon Stock may continue to be so quoted without interruption following the Closing Date.

ARTICLE 4

CONDITIONS PRECEDENT

4.1Conditions Precedent to the Obligations of CJVE and the CJVE Stockholder Parties. The obligation of CJVE and the CJVE Stockholder Parties to consummate the Share Exchange and the Note Exchange are subject to the fulfillment, prior to or as of the Closing Date, as indicated below, of each of the following conditions; any one of which may be waived at Closing by CJVE, on behalf of itself and the CJVE Stockholder Parties (the “CJVE Common Stockholders’ Representative”):

(a)The representations and warranties by or on behalf of PETX contained in this Agreement or in any certificate or document delivered pursuant to the provisions hereof shall be true in all material respects at and as of Closing Date as though such representations and warranties were made at and as of such time;

(b)PETX shall have performed and complied in all material respects, with all covenants, agreements, and conditions set forth in, and shall have executed and delivered all documents required by this Agreement to be performed or complied with or executed and delivered by it prior to or at the Closing, including, without limitation, all of the covenants and agreements of PETX set forth in Article 5 of this Agreement;

(c)On the Closing Date, the PETX Chief Executive Officer shall have delivered to CJVE a certificate, duly executed by such Person and certifying, that to the best of such Person’s knowledge and belief, the representations and warranties of PETX set forth in this Agreement are true and correct;

(d)On or before the Closing, the Board of Directors of PETX shall have approved, in accordance with Nevada law, the execution, delivery and performance of this Agreement and the consummation of the transaction contemplated herein and authorized all of the necessary and proper action to enable PETX to comply with the terms of the Agreement;

(e)On or before the Closing Date, the PETX Principal Stockholder shall have contributed back to the treasury of PETX such number of the shares of PETX Common Stock then owned by the PETX Principal Stockholder, that the aggregate number of shares of PETX Common Stock outstanding shall not exceed 700,000 shares of PETX Common Stock;

(f)At the Closing, all instruments and documents delivered to CJVE and the Shareholders pursuant to provisions hereof shall be reasonably satisfactory to legal counsel for CJVE;

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(g)PETX shall have issued to the CJVE Stockholder Parties the Exchange Shares.

The Exchange Shares issued at the Closing will be validly issued, non-assessable and fully paid under the Nevada Revised Statutes and the issuance and sale of the Exchange Shares shall be exempt from registration under the Securities Act and qualification under all state securities laws.

4.2Conditions Precedent to the Obligations of PETX and the PETX Principal Stockholder. All obligations of PETX and the PETX Principal Stockholder under this Agreement are subject to the fulfillment, prior to or at Closing, of each of the following conditions (any one of which may be waived at Closing by PETX):

(a)The representations and warranties by CJVE and the CJVE Stockholder Parties contained in this Agreement or in any certificate or document delivered pursuant to the provisions hereof shall be true in all material respects at and as of the Closing as though such representations and warranties were made at and as of such time;

(b)CJVE and the CJVE Stockholder Parties shall have performed and complied with, in all material respects, with all covenants, agreements, and conditions set forth in, and shall have executed and delivered all documents required by this Agreement to be performed or complied or executed and delivered by them prior to or at the Closing;

(c)On the Closing Date, the CJVE Principal Executive Officer shall have delivered to PETX a certificate, duly executed by such Person and certifying, that to the best of such Person’s knowledge and belief, the representations and warranties of CJVE set forth in this Agreement are true and correct in all material respects.

(d)PETX shall have received reasonable assurance from CJVE that each CJVE Security Holder (other than holders of CJVE options) has duly executed, no earlier than six months prior to the Closing Date, an“Investment Letter” in form and substance reasonably satisfactory to PETX making the representations that PETX reasonably deems necessary to confirm that it may issue the PETX Securities to the CJVE Security Holders without registration under the Securities Act pursuant to Section 4(2) thereof and Rule 506 of Regulation D thereunder, which representations shall include that the PETX Securitiesare being acquired for investment purposes and that the CJVE Security Holder is an “accredited investor” within the meaning of Rule 501 of Regulation D.

ARTICLE 5

COVENANTS

5.1Corporate Examinations and Investigations. Prior to the Closing Date, the Parties acknowledge that they have been entitled, through their employees and representatives, to make such investigation of the assets, properties, business and operations, books, records and financial condition of the other as they each may reasonably require. No investigations, by a party hereto shall, however, diminish or waive any of the representations, warranties, covenants or agreements of the party under this Agreement.

5.2Further Assurances. The Parties shall execute such documents and other papers and take such further actions as may be reasonably required or desirable to carry out the provisions hereof and the transactions contemplated hereby. Each such party shall use its best efforts to fulfill or obtain the fulfillment of the conditions to the Closing, including, without limitation, the execution and delivery of any documents or other papers, the execution and delivery of which are necessary or appropriate to the Closing.

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5.3Confidentiality. In the event the transactions contemplated by this Agreement are not consummated, Parties agree to keep confidential any information disclosed to each other in connection therewith for a period of three (3) years from the date hereof; provided, however, such obligation shall not apply to information which:

(i) at the time of the disclosure was public knowledge;

(ii) is required to be disclosed publicly pursuant to any applicable federal or state securities laws;

(iii) after the time of disclosure becomes public knowledge (except due to the action of the receiving party);

(iv) the receiving party had within its possession at the time of disclosure; or

(v)is ordered disclosed by a Court of proper jurisdiction.

5.4Covenants of PETX.

(a)Expenses. PETX agrees to pay all outstanding indebtedness and payables prior to the Closing and agrees not to incur any costs or expenses that it does not pay prior to the Closing.

(b)Warrants, Options. PETX shall cause its outstanding warrantsand optionsto be exercised or terminated prior to the Closing and agrees not to issue prior to the Closing any warrants, options or other rights to acquire capital stock of PETX.

(c)Validity of Exchange Shares. At the Closing, the Exchange Shares to be issued and delivered to the CJVE Stockholder Parties hereunder will, when so issued and delivered, constitute valid and legally issued shares of PETX Common Stock, fully paid and non-assessable.

5.7Post-Closing Covenants. Promptly following the Closing Date the Board of Directors of PETX shall approve the following matters and submit such actions to the PETX Stockholders for stockholder approval:

(a)Change of Corporate Name and Address. PETX shall change its corporate name to “WOOZYFLY INC.” or such other corporate name as shall be acceptable to the CJVE Principal Stockholders. PETX shall change its principal place of business to 19 West 59^th Street, 6^th Floor, New York, New York 10012.

(b)Stock Split. PETX shall split the PETX Common Stock such that the number of shares of PETX Common Stock held by the stockholders whose names appear on the register of stockholders and the register of beneficial stockholders immediately after the Closing shall be split at the ratio of 6 shares for each share.

(c)Stock Option Plan. PETX shall adopt an incentive stock option plan for key employees, directors, consultants and others providing services to PETX and CJVE, pursuant to which up to 10,000,000 shares of PETX Common Stock shall be authorized for issuance upon such terms and conditions as shall be recommended by the compensation committee and approved by a majority of the members of the board of directors.

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(d)The Loan Transaction. PETX shall consummate the Loan Transaction with the parties to the Loan Agreement.

5.8Boards of Directors; Officers.At the Closing Date of the Share Exchange, the members of the Board of Directors of PETX shall elect the current directors of CJVE, to serve as directors of PETX until the earlier of their death, resignation or removal or until the next annual meeting of the stockholders of PETX, when their respective successors are duly elected and qualified. On the Closing Date, the newly constituted Board of Directors of PETX shall elect the officers of CJVE to be directors of PETX, and PETX’s existing executive officers shall resign.

5.9Required Audits and Form 8-K Registration Statement.By not later than the Closing Date, CJVE and the CJVE Principal Stockholders shall have caused to have been delivered to PETX a definitive final draft of a Form 8-K Current Report to include all appropriate financial statements and disclosures of the business, management, risk factors, capitalization and principal security holders of PETX and its CJVE subsidiary (after giving effect to the Share Exchange), as shall be required under the Exchange Act (the “Form 8-K Report”). PETX shall cause the Form 8-K Report to be filed with the SEC not later than four (4) Business Days after the Closing Date. In connection with the foregoing, PETX and the PETX Principal Stockholder shall assist and cooperate with CJVE in complying with the covenants set forth in this Section 5.9.

5.10Indemnification of Officers and Directors. It is the intention of the Parties that PETX and CJVE shall indemnify its officers and directors to the fullest extent permitted by Nevada and Delaware law, as applicable. In such connection, the Parties agree not to amend their respective articles or certificate of incorporation or by-laws if such amendment shall have the effect of reducing, terminating or otherwise adversely affecting the indemnification rights and privileges applicable to officers and directors of each of PETX and CJVE, as the same are in effect immediately prior to the Closing Date.

5.11Voting for Transactions. Each of the CJVE Principal Stockholders hereby covenants and agrees to vote all of its shares of PETX Common Stock IN FAVOR of the transactions contemplated by this Agreement.

5.12Expenses. It is understood and agreed that following the execution of this Agreement, any and all expenses with respect to any filings, documentation and related matters with respect to the consummation of the transactions contemplated hereby shall be the sole responsibility of CJVE, and neither PETX nor the PETX Principal Stockholder shall be responsible for any such expenses or fees associated with such filings; provided, however, that PETX and the PETX Principal Stockholder shall fully cooperate and execute all required documents as indicated.

ARTICLE 6

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

Notwithstanding any right of either party to investigate the affairs of the other party and its Shareholders, each party has the right to rely fully upon representations, warranties, covenants and agreements of the other party and its Shareholders contained in this Agreement or in any document delivered to one by the other or any of their representatives, in connection with the transactions contemplated by this Agreement. All such representations, warranties, covenants and agreements shall survive the execution and delivery hereof and the closing hereunder for eighteen (18) months following the Closing.

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ARTICLE 7

INDEMNIFICATION; DISPUTE RESOLUTION.

7.1Indemnification by CJVE.

(a)From and after the Closing, the CJVE shall indemnify and hold harmless PETX, the PETX Principal Stockholder and their Affiliates, directors, officers and employees (collectively, the “PETX Parties”) from and against any and all direct Damages finally awarded arising out of, resulting from or in any way related to:

(i)a breach by CJVE or the CJVE Stockholder Parties of their representations and warranties contained herein, or

(ii)the failure to perform or satisfy, when due, any of the covenants and agreements made by CJVE and the CJVE Stockholder Parties in this Agreement or in any other document or certificate delivered by CJVE or the CJVE Stockholder Parties at the Closing pursuant hereto.

(b)Notwithstanding the foregoing, the indemnification obligations of CJVE and the CJVE Stockholder Parties under Section 7.1(a)(i) above shall (i) as to each individual CJVE Shareholder Party be limited to the extent of the Market Value of the number of Exchange Shares received by such CJVE Stockholder Party that is liable for indemnification hereunder (the “Indemnity Cap”), (ii) only arise if a claim for Damages shall be made in writing by one or more PETX Parties to CJVE or the CJVE Stockholder Parties by December 31, 2008, and (iii) only be applicable to Damages incurred by PETX Parties in excess of $150,000 (the “Indemnity Floor”). There shall be no time limitation with respect to the matters contemplated by Section 7.1(a)(ii) above, and such indemnity obligations shall survive indefinitely. Any payment made to any of PETX Parties by the CJVE Stockholder Parties pursuant to the indemnification obligations under this Section 7.1 shall constitute a reduction in value of the Share Exchange paid pursuant to this Agreement.

(c)In the event that any claim for Damages shall be asserted against any of PETX Parties for which the CJVE Stockholder Parties is liable to indemnify against pursuant to this Section 7.1, the CJVE Stockholder Parties shall have the sole right to conduct, at their expense, the defense of any and all such claims with counsel of their choosing, and shall have the sole right to effect any financial settlement of any such claims for Damages; provided, however, that if any such settlement would result in any injunction or restrictions on the Business or any other activities of any of PETX Parties, or otherwise require any of PETX Parties to pay any ongoing royalties or other payments to any Person, no such settlement may be effected by the CJVE Stockholder Parties without the prior written consent of the affected PETX Party or Parties.

7.2Indemnification by PETX Principal Stockholder.

(a)From and after the Closing, and provided that the Closing shall occur,the PETX Principal Stockholder shall indemnify and hold harmless each of PETX, CJVE and the CJVE Stockholder Parties and their Affiliates from and against any and all direct Damages finally awarded arising out of, resulting from or in any way related to:

(i)amaterial breach by PETX and the PETX Principal Stockholder of their respective representations and warranties contained herein, or

(ii)amaterial breach by PETX or the PETX Principal Stockholder of any obligation or agreement under this Agreement required to be performed prior to the Closing.

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Notwithstanding the foregoing, the PETX Principal Shareholder shall have no obligation to indemnify under Section 7.2(a) for any violation by PETX of the Securities Act, the Exchange Act or any state securities laws in connection with this Agreement and the transactions contemplated by this Agreement, including without limitation the issuance of the PETX Securities.

(b)In the event that any claim for Damages shall be asserted against any of CJVE, PETX or the CJVE Stockholder Parties or their Affiliates for which PETX Principal Stockholder is liable to indemnify against pursuant to this Section 7.2, the PETX Principal Stockholder shall have the sole right to conduct, at his expense, the defense of any and all such claims with counsel of their choosing, and shall have the sole right to effect any financial settlement of any such claims for Damages; provided, however, that if any such settlement would result in any injunction or restrictions on any of CJVE, PETX or the CJVE Stockholder Parties or their Affiliates, or otherwise require any of such Persons or their Affiliates to pay any ongoing royalties or other payments to any other Person, no such settlement may be effected by the PETX Principal Stockholder without the prior written consent of the board of directors of PETX.

7.3Resolution of Disputes. Any dispute arising under this Agreement which cannot be resolved among the Parties shall be submitted to final and binding arbitration in accordance with the then prevailing rules and regulations of the American Arbitration Association (the “AAA”), located in New York, New York. There shall be three arbitrators, one selected by the claimant, one selected by the respondent and the third arbitrator selected by the AAA. The decision and award of the arbitrators shall be final and binding upon all Parties and may be enforced in any federal or state court of competent jurisdiction. Service of process on any one or more Parties in connection with any such arbitration may be made by registered or certified mail, return receipt requested or by email or facsimile transmission.

ARTICLE 8

MISCELLANEOUS

8.1Waivers. The waiver of a breach of this Agreement or the failure of any party hereto to exercise any right under this Agreement shall in no way constitute waiver as to future breach whether similar or dissimilar in nature or as to the exercise of any further right under this Agreement.

8.2Amendment. This Agreement may be amended or modified only by an instrument of equal formality signed by the Parties or the duly authorized representatives of the respective Parties.

8.3Assignment. This Agreement is not assignable except by operation of law.

8.4Notice. Until otherwise specified in writing, the mailing addresses and fax numbers of the Parties of this Agreement shall be as follows:

To: PETX:

c/o C J Vision Enterprises, Inc.

59 West 19^th Street, 6^th Floor

New York, New York 10011

Attn: Chief Executive Officer

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To: the PETX Principal Stockholder:

Renea Yamada

5219 S. Pittsburg Street

Spokane, WA 99223

To: CJVE:

C J Vision Enterprises, Inc.

59 West 19^th Street, 6^th Floor

New York, New York 10011

Attn: Chief Executive Officer

cc:           Jeanne Drewsen, Esq.

59 West 19^th Street, 6^th Floor

New York, New York 10011

To: The CJVE Principal Stockholders and CJVE Convertible Noteholders:

c/o C J Vision Enterprises, Inc.

59 West 19^th Street, 6^th Floor

New York, New York 10011

Attn: Chief Executive Officer

Any notice or statement given under this Agreement shall be deemed to have been given if sent by registered mail addressed to the other party at the address indicated above or at such other address which shall have been furnished in writing to the addressor.

8.5Legal Counsel. CJVE has been represented by Gary A. Agron, Esq. (“Agron”) in connection with this Agreement and Pet Express has been advised by separate counsel selected by it. The parties acknowledge that Agron has previously represented affiliates of PETX in connection with other matters. Both parties waive by execution hereof any potential for a conflict of interest that may arise in connection with Agron’s prior representation of the parties and specifically waive any conflict of interest, claim or cause of action that may arise in connection with such prior representation.

8.6Governing Law. This Agreement shall be construed, and the legal relations between the Parties determined, in accordance with the laws of the State of New York, thereby precluding any choice of law rules which may direct the application of the laws of any other jurisdiction.

8.7Publicity. No publicity release or announcement concerning this Agreement or the transactions contemplated hereby shall be issued by either party hereto at any time from the signing hereof without advance approval in writing of the form and substance by the other party.

8.8Entire Agreement. This Agreement (including the Schedules to be attached hereto) and the collateral agreements executed in connection with the consummation of the transactions contemplated herein contain the entire agreement among the Parties with respect to the transactions contemplated hereby, and supersedes all prior agreements, written or oral, with respect hereof.

8.9Headings. The headings in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

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8.10Severability of Provisions. The invalidity or unenforceability of any term, phrase, clause, paragraph, restriction, covenant, agreement or provision of this Agreement shall in no way affect the validity or enforcement of any other provision or any part thereof.

8.11Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed, shall constitute an original copy hereof, but all of which together shall consider but one and the same document.

8.12Binding Effect. This Agreement shall be binding upon the Parties hereto and inure to the benefit of the Parties, their respective heirs, administrators, executors,

successors and assigns.

8.13Facsimile Signatures.The Parties hereby mutually agree that this Agreement may be executed by facsimile signatures of any one or more Parties, each of which shall have the same legal and binding force and effect as ribbon original signatures.

8.14Press Releases. The Parties will mutually agree as to the wording and timing of any informational releases concerning this transaction prior to and through Closing.

[the balance of this page intentionally left blank - signature pages follow]

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first above written.

	PET EXPRESS SUPPLY, INC.
By:
	Renea Yamada
	President

RENEA YAMADA 

	C J VISION ENTERPRISES, INC.
By:
	Jonathan Bomser,
	President and CEO

	CJVE PRINCIPAL STOCKHOLDERS:
	DIGITAL FX INTERNATIONAL, INC.
By:
	Name:
	Title:

	BHI HOLDINGS, INC.
By:
	Name:
	Title:

	WF HOLDINGS, LLC
By:
	Name:
	Title:

	VISION OPPORTUNITY MASTER FUND, LTD.
By:
	Name:
	Title:

	PETER NEWMAN
By:
	Name:
	Title:

	CJVE CONVERTIBLE NOTEHOLDERS:
	CORPORATE COMMUNICATIONS
	NETWORK, INC.
By:
	Name:
	Title:

	LYNN COLE CAPITAL CORP.
By:
	Name:
	Title:

	MKM OPPORTUNITY MASTER FUND, LTD.
By:
	Name:
	Title:

ADDITIONAL CJVE STOCKHOLDER:  

Name of Stockholder

Signature of Stockholder  

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SCHEDULES

CJVE Schedules

Schedule 2.2 CJVE Warrants and Options currently in existence

Schedule 2.3 Holders of Issued and Outstanding CJVE Securities

Schedule 2.4 CJVE Financial Statements

Schedule 2.6 Material Adverse Changes

Schedule 2.11 Material Contracts; Leases

Schedule 2.13 List of Assets

Schedule 2.14 Undisclosed Liabilities

Schedule 2.15 Changes in Operations

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EX-4.1

THE WARRANT REPRESENTED HEREBY AND THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER SUCH ACT, OR PET EXPRESS SUPPLY, INC. RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER REASONABLY SATISFACTORY TO COUNSEL FOR PET EXPRESS SUPPLY, INC. THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE.

PET EXPRESS SUPPLY, INC.

WARRANT TO PURCHASE [         ] SHARES OF COMMON STOCK

July __, 2008 Warrant No.

For value received, PET EXPRESS SUPPLY, INC., a Nevada corporation (PXPS.OB) (the “Corporation”), hereby certifies that [INSERT NAME OF INVESTOR], or his, her or its registered transferees, successors or assigns (each person or entity holding all or part of this Warrant being referred to as a “Holder”), is the registered holder of warrants to subscribe for and purchase [___________ (________)] shares (as adjusted pursuant to Section 3 hereof, the “Warrant Shares”) of the fully paid and Common Stock, $0.001 par value per share (the “Common Stock”), of the Corporation, at a purchase price per share initially equal to Four and Fifty Hundredths Dollars ($4.50) (the “Exercise Price”) on or before, 5:00 P.M., Eastern Time, on July 31, 2013 (the “Expiration Date”), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein, the term “Business Day” means any day other than a Saturday or Sunday on which commercial banks located in New York, New York are open for the general transaction of business.

This Warrant is issued pursuant to that certain Loan and Security Agreement dated as of July 25, 2008, by and among the Corporation and the lenders named therein (the “Loan Agreement”), a copy of which is on file at the principal office of the Corporation. This Warrant is one of several warrants representing the right to purchase Common Stock issuable pursuant to and contemplated by the Loan Agreement.

Section 1.Exercise.

(a)Method of Exercise; Payment; Issuance of New Warrant.

(i)Subject to the provisions hereof, the Holder may exercise this Warrant, in whole or in part and from time to time, by the surrender of this Warrant (with the Notice of Exercise attached hereto as Appendix A duly executed) at the principal office of the Corporation, or such other office or agency of the Corporation as it may reasonably designate by written notice to the Holder, during normal business hours on any Business Day, and the payment by the Holder by cash, certified check payable to the Corporation or wire transfer of immediately available funds to an account designated to the exercising Holder by the Corporation of an amount equal to the then applicable Exercise Price multiplied by the number of Warrant Shares then being purchased, or in the event of a cashless exercise pursuant to Section 1(b) below, with the Net Issue Election Notice attached hereto as Appendix B duly executed and completed. On the date on which the Holder shall have satisfied in full the Holder’s obligations set forth herein regarding an exercise of this Warrant (provided such date is prior to the Expiration Date), the Holder (or such other person or persons as directed by the Holder) shall be treated for all purposes as the holder of record of such Warrant Shares as of the close of business on such date.

(ii)In the event of any exercise of the rights represented by this Warrant, certificates for the whole number of shares of Common Stock so purchased shall be delivered to the Holder (or such other person or persons as directed by the Holder) as promptly as is reasonably practicable (but not later than three (3) Business Days) after such exercise at the Corporation’s expense, and, unless this Warrant has been fully exercised, a new Warrant representing the number of whole Warrant Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder as soon as reasonably practicable thereafter (but not later than three (3) Business Days) after such exercise.

(b)Cashless Right to Convert Warrant into Common Stock. In addition to and without limiting the rights of the Holder hereof under the terms of this Warrant, at any time after the date six months following the issuance date hereof, if the Common Stock is then listed on a national stock exchange or is included in The Nasdaq Stock Market, Inc. (“Nasdaq”), the Over-the-Counter Bulletin Board or the “pink sheets”, and if the shares of Common Stock covered by this Warrant are not registered under an effective registration statement, the Holder may elect to receive, without the payment by the Holder of the Exercise Price, Warrant Shares equal to the value of this Warrant or any portion hereof by the surrender of this Warrant (or such portion of this Warrant being so exercised) together with the Net Issue Election Notice annexed hereto as Appendix B duly executed and completed, at the office of the Corporation, or such other office or agency of the Corporation as it may reasonably designate by written notice to the Holder, during normal business hours on any Business Day. Thereupon, the Corporation shall issue to the Holder such number of fully paid, validly issued and nonassessable Warrant Shares, as is computed using the following formula:

X= Y(A-B)

A

where

X =the number of shares of Common Stock to be issued to the Holder (or such other person or persons as directed by the Holder) upon such exercise of the rights under this Section 1(b)

Y =the total number of shares of Common Stock covered by this Warrant which the Holder has surrendered for cashless exercise

A =the “Fair Market Value” of one share of Common Stock on the date that the Holder delivers the Net Issue Election Notice to the Corporation as provided herein

B =the Exercise Price in effect under this Warrant on the date that the Holder delivers the Net Issue Election Notice to the Corporation as provided herein

For purposes of this Section 1(b), the “Fair Market Value” of a share of Common Stock as of a particular date (the “Valuation Date”) shall mean the following: (w) if the Common Stock is then listed on a national stock exchange, the closing sale price of one share of Common Stock on such exchange on the last trading day prior to the Valuation Date, provided that if such stock has not traded in the prior ten (10) trading sessions, the Fair Market Value shall be the average closing price of one share of Common Stock in the most recent ten (10) trading sessions during which the Common Stock has traded; (x) if the Common Stock is then included in Nasdaq, the closing sale price of one share of Common Stock on Nasdaq on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low ask price quoted on Nasdaq as of the end of the last trading day prior to the Valuation Date, provided that if such stock has not traded in the prior ten (10) trading sessions, the Fair Market Value shall be the average closing price of one share of Common Stock in the most recent ten (10) trading sessions during which the Common Stock has traded; (y) if the Common Stock is then included in the Over-the-Counter Bulletin Board, the closing sale price of one share of Common Stock on the Over-the-Counter Bulletin Board on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low ask price quoted on the Over-the-Counter Bulletin Board as of the end of the last trading day prior to the Valuation Date, provided that if such stock has not traded in the prior ten (10) trading sessions, the Fair Market Value shall be the average closing price of one share of Common Stock in the most recent ten (10) trading sessions during which the Common Stock has traded,or (z) if the Common Stock is then included in the “pink sheets”, the closing sale price of one share of Common Stock on the “pink sheets” on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low ask price quoted on the “pink sheets” as of the end of the last trading day prior to the Valuation Date, provided that if such stock has not traded in the prior ten (10) trading sessions, the Fair Market Value shall be the average closing price of one share of Common Stock in the most recent ten (10) trading sessions during which the Common Stock has traded.

(c) Exercise Limitations. The Corporation shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1 or otherwise, to the extent that after giving effect to the issuance of Common Stock after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other person or entity acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Corporation (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Corporation is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 1(c) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Corporation’s most recent periodic or annual report, as the case may be, (B) a more recent public announcement by the Corporation or (C) any other notice by the Corporation or the Corporation’s Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon not less than 61 days’ prior notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 1(c), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 1(c) shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Corporation. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(c) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

Section 2.Reservation of Shares; Stock Fully Paid. The Corporation shall keep reserved a sufficient number of shares of the authorized and unissued shares of Common Stock to provide for the exercise of the rights of purchase represented by this Warrant in compliance with its terms. All Warrant Shares issued upon exercise of this Warrant shall be, at the time of delivery of the certificates for such Warrant Shares upon payment in full of the Exercise Price therefor in accordance with the terms of this Warrant (or proper exercise of the cashless exercise rights contained in Section 1(b) hereof), duly authorized, validly issued, fully paid and nonassessable shares of Common Stock. The Corporation shall, during all times prior to the Expiration Date when the shares of Common Stock issuable upon the exercise of this Warrant are authorized for listing or quotation on any national securities exchange (or Nasdaq, the Over-the-Counter Bulletin Board or the “pink sheets”, as the case may be), keep the shares of Common Stock issuable upon the exercise of this Warrant authorized for listing or quotation on such national securities exchange (or Nasdaq, the Over-the-Counter Bulletin Board or the “pink sheets”, as the case may be).

Section 3.Adjustments and Distributions. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall each, in certain instances, be subject to adjustment from time to time upon the occurrence of certain events, as follows:

(a)If the Corporation shall, at any time or from time to time while this Warrant is outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares, then the number of Warrant Shares purchasable upon exercise of this Warrant and the Exercise Price in effect immediately prior to the date upon which such change shall become effective shall be proportionally adjusted by the Corporation so that the Holder thereafter exercising this Warrant shall be entitled to receive the number of shares of Common Stock which the Holder would have received if this Warrant had been exercised immediately prior to such event upon payment of an Exercise Price that has been proportionally adjusted to reflect such event. Such adjustments shall be made successively whenever any event listed above shall occur.

(b)If any recapitalization, reclassification or reorganization of the capital stock of the Corporation (other than a change in par value or a subdivision or combination as provided for in Section 3(a) above) shall be effected in such a manner (including, without limitation, in connection with any consolidation or merger), that holders of Common Stock shall be entitled to receive stock, securities, or other assets or property (a “Reorganization”), then, as a result of such Reorganization, the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of the Common Stock of the Corporation immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) upon the proper exercise of this Warrant, such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby. In the event of any Reorganization, appropriate provision shall be made by the Corporation with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of Warrant Shares) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The provisions of this Section 3(b) shall similarly apply to successive Reorganizations.

(c)If any sale, transfer or other disposition (other than the granting of liens and/or security interests) of all or substantially all of the Corporation’s assets to another entity shall be effected, then, the Holder shall thereafter have the right to purchase and receive (in lieu of the shares of the Common Stock of the Corporation immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) upon the proper exercise of this Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise of this Warrant, had such sale, transfer or other disposition not taken place, and in any such case appropriate provision shall be made by the Corporation with respect to the rights and interests of the Holder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Exercise Price and of the number of Warrant Shares) shall thereafter be applicable, as nearly equivalent as may be practicable, in relation to any shares of stock, securities or properties thereafter deliverable upon the exercise hereof.

(d)In case the Corporation shall fix a payment date for the making of a distribution to all holders of Common Stock of evidences of indebtedness or assets (other than dividends or distributions referred to in Section 3(a) hereof), or subscription rights or warrants, the Exercise Price to be in effect after such payment date shall be determined by multiplying the Exercise Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the fair market value per share of Common Stock immediately prior to such payment date, less the fair market value of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants (in each case, as such fair market value is determined in good faith by the Board of Directors of the Corporation (the “Board”)), and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such fair market value per share of Common Stock immediately prior to such payment date. Such adjustment shall be made successively whenever such a payment date is fixed. In the event that any dividend or distribution for which this Section 3(d) would require an adjustment is not so paid or made, the Exercise Price shall be adjusted to be the Exercise Price which would then be in effect if such dividend or distribution had not been declared.

(e)In the event that, as a result of an adjustment made pursuant to this Section 3, the Holder shall become entitled to receive any shares of capital stock of the Corporation other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant.

(f)Common Stock Issuances.  For a period commencing on the date of the Loan Agreement and continuing until the second anniversary thereof, if the Corporation or any of its subsidiaries (A) issues or sells any Common Stock or any convertible securities, warrants, options or other rights to subscribe for or to purchase or exchange for, shares of Common Stock (“Convertible Securities”), or (B) directly or indirectly effectively reduces the conversion, exercise or exchange price for any Convertible Securities which are currently outstanding (other than pursuant to terms existing on the date hereof), at or to an effective Per Share Selling Price (the “Lower Per Share Selling Price”) which is less than the then applicable Exercise price, then in each such case, the Exercise price in effect immediately prior to such issue or sale or record date shall be automatically reduced effective concurrently with such issue or sale to the Lower Per Share Selling Price (which figure shall be appropriately and equitably adjusted as provided herein for stock splits, stock dividends, and similar events). The foregoing provisions of this subsection shall not apply to issuances or sales of (x) Common Stock upon conversion, exercise or exchange of Convertible Securities outstanding on the issuance date hereof in accordance with the terms in effect on such issuance date, (y) Common Stock or Convertible Securities under the Corporation’s duly adopted stock option and bonus plans for employees and directors, or (z) Common Stock or Convertible Securities issued in a merger/acquisition transaction to which the Corporation is a party. For the purposes of the foregoing adjustments, in the case of the issuance of any Convertible Securities, the maximum number of shares of Common Stock issuable upon exercise, exchange or conversion of such Convertible Securities shall be deemed to be outstanding, provided that no further adjustment shall be made upon the actual issuance of Common Stock upon exercise, exchange or conversion of such Convertible Securities. For purposes of this Section 3(c)(iv), if an event occurs that triggers more than one of the above adjustment provisions, then only one adjustment shall be made and the calculation method which yields the greatest downward adjustment in the affected Exercise price shall be used.

“Per Share Selling Price” shall include the amount actually paid by any Person for each share of Common Stock in a sale or issuance by the Corporation. In the event a fee is paid by the Corporation in connection with such transaction directly or indirectly to such Person being sold or issued such securities or its affiliates (other than for transaction expenses up to $50,000), any such fee shall be deducted from the selling price pro rata to all shares sold in the transaction to arrive at the Per Share Selling Price. A sale of shares of Common Stock shall include the sale or issuance of rights, options, warrants or convertible, exchangeable or exercisable securities under which the Corporation is or may become obligated to issue shares of Common Stock, and in such circumstances the Per Share Selling Price of the Common Stock covered thereby shall also include the exercise, exchange or exercise price thereof (in addition to the consideration received by the Corporation upon such sale or issuance less the fee amount as provided above). In case of any such security issued in a Variable Rate Transaction or an MFN Transaction, the Per Share Selling Price shall be deemed to be the lowest conversion or exercise price at which such securities are converted or exercised or might have been converted or exercised in the case of a Variable Rate Transaction, or the lowest adjustment price in the case of an MFN Transaction, over the life of such securities. If shares are issued for a consideration other than cash, the Per Share Selling Price shall be the fair value of such consideration as determined in good faith by independent certified public accountants mutually acceptable to the Corporation and the Purchaser.

(g)Notice of Adjustments. With each adjustment pursuant to this Section 3, the Corporation shall deliver a certificate signed by its chief financial or executive officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Exercise Price and the number of Warrant Shares purchasable hereunder after giving effect to such adjustment, which shall be mailed by first class mail, postage prepaid to the Holder.

Section 4.Transfer Taxes. The Corporation will pay any documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of this Warrant; provided, however, that the Corporation shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered holder of this Warrant in respect of which such shares are issued, and in such case, the Corporation shall not be required to issue or deliver any certificate for Warrant Shares until the person requesting the same has paid to the Corporation the amount of such tax or has established to the Corporation’s reasonable satisfaction that such tax has been paid.

Section 5.Mutilated or Missing Warrants. In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Corporation shall issue in exchange and substitution, and upon cancellation, of the mutilated Warrant, a new Warrant of like tenor and for the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Corporation of such loss, theft or destruction of this Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto, if requested by the Corporation.

Section 6.Fractional Shares. In lieu of any fractional shares of Common Stock that may be issuable in connection with any exercise or cashless exercise hereunder, the Corporation may elect to make a cash payment therefor to the Holder (or such other person or persons as directed by the Holder) based on the fair market value of a share of Common Stock (as determined in good faith by the Board) as of the date of exercise or cashless exercise of this Warrant.

Section 7.Compliance with Securities Act and Legends. The Holder, by acceptance hereof, agrees that this Warrant and the shares of Common Stock to be issued upon exercise hereof, are being acquired for investment and that such Holder will not offer, sell or otherwise dispose of this Warrant, or any shares of Common Stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder, as amended, or any state’s securities laws. All shares of Common Stock issued upon exercise of this Warrant (unless registered under the Securities Act of 1933) shall be stamped or imprinted with a legend as follows:

“THIS SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE (THE “LAWS”) AND CANNOT BE SOLD OR TRANSFERRED UNLESS AND UNTIL (I) THEY ARE SO REGISTERED UNDER THE ACT OR THE LAWS OR (II) THE HOLDER FURNISHES THE CORPORATION WITH AN OPINION OF COUNSEL, WHICH OPINION IS ACCEPTABLE TO THE CORPORATION, SUCH ACCEPTANCE NOT TO BE UNREASONABLY WITHHELD, DELAYED OR CONDITIONED, THAT REGISTRATION UNDER THE ACT OR THE LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED SALE OR TRANSFER.”

Section 8.Rights as a Stockholder. No Holder, as such, shall be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other securities of the Corporation which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Corporation or any right to vote for the election of the directors or upon any matter submitted to stockholders at any meeting thereof, or to receive notice of meetings, or to receive dividends or subscription rights or otherwise, until this Warrant shall have been exercised and the Warrant Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein.

Section 9.Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Corporation and the then current Holder, and such change, waiver, discharge or termination shall be binding on any future Holder.

Section 10.Notices. Unless otherwise specifically provided herein, all communications under this Warrant shall be in writing and shall be deemed to have been duly given (a) on the date personally delivered to the party to whom notice is to be given, (b) on the day of transmission if sent by facsimile transmission to a number provided to a party specifically for such purposes and the sending party receives confirmation of the completion of such transmission, (c) on the Business Day after delivery to Federal Express or similar overnight courier which utilizes a written form of receipt, or (d) on the fifth day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, and properly addressed, return receipt requested, to each such Holder at its address as shown on the books of the Corporation or to the Corporation at the address indicated therefor on the signature page of this Warrant. Any party hereto may change its address for purposes of this Section 10 by giving the other party written notice of the new address in the manner set forth herein.

Section 11.Descriptive Headings. The descriptive headings contained in this Warrant are inserted for convenience only and do not constitute a part of this Warrant.

Section 12.Governing Law. The validity, interpretation and performance of this Warrant shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and to be performed entirely within such State, regardless of the law that might be applied under principles of conflicts of law. The Corporation and, by accepting this Warrant, the Holder, each irrevocably submits to the exclusive jurisdiction of the state and federal courts located in New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Warrant. The Corporation and, by accepting this Warrant, the Holder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. The Corporation and, by accepting this Warrant, the Holder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

Section 13.Acceptance. Receipt of this Warrant by the Holder hereof shall constitute acceptance of and agreement to the foregoing terms and conditions.

Section 14.No Impairment of Rights. The Corporation will not, by amendment of its Articles of Incorporation or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against material impairment.

Section 15.Assignment. A Holder may transfer its rights hereunder, in whole or in part, to any other person provided that written notice is given to the Corporation of any such transfer and such transfer is in accordance with applicable law, including the securities laws, and such transfer is to an “accredited investor” as defined in the securities laws. Upon receipt by the Corporation of notice by a Holder of a permissible transfer of any portion of this Warrant in accordance with the terms hereof, the Corporation shall promptly deliver to such transferee a Warrant in the form hereof exercisable for the number of Warrant Shares the right of which to purchase has been transferred.

IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed on its behalf by one of its officers thereunto duly authorized.

PET EXPRESS SUPPLY, INC. 

By: 

Jonathan Bomser
Chief Executive Officer

APPENDIX A

NOTICE OF EXERCISE

To:PET EXPRESS SUPPLY, INC.

1.The undersigned hereby irrevocably elects to purchase [_____] shares of Common Stock of PET EXPRESS SUPPLY, INC. pursuant to the terms of the attached Warrant, and tenders herewith payment of the aggregate Exercise Price of such shares in full, by [cash, certified check/wire transfer, or surrender of the originally executed Warrant] [select the applicable method of payment].

2.Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name or names as are specified below:

(Name)

(Address)

                               (Signature)

                               (Date)  

3.Please issue a new Warrant of equivalent form and tenor for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:

Date:

(Warrantholder)

Name: (Print)

By: 

APPENDIX B

Net Issue Election Notice

To:PET EXPRESS SUPPLY, INC.

Date: [_________________________]

The undersigned hereby elects under Section 1(b) of this Warrant to surrender the right to purchase [____________] shares of Common Stock pursuant to this Warrant and hereby requests the issuance of [_____________] shares of Common Stock. The certificate(s) for the shares issuable upon such net issue election shall be issued in the name of the undersigned or as otherwise indicated below.

Signature

Name for Registration

Mailing Address

Please issue a new Warrant of equivalent form and tenor for the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:

Date:

(Warrantholder)

 Name: (Print)

  By: 

EX-4.2

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED INTEREST SET FORTH BELOW.

6 % CONVERTIBLE NOTE DUE JUNE 30, 2011

OF

PET EXPRESS SUPPLY, INC.

NoteNo.:_________ Issuance Date: July ___, 2008    Original Principal Amount: $_________                                                                 New York, New York

This Note (“Note”) is one of a duly authorized issue of Notes of PET EXPRESS SUPPLY, INC., a corporation duly organized and existing under the laws of the State of Nevada (the “Corporation”), issued pursuant to that certain Loan and Security Agreement dated as of July 25, 2008, by and among the Corporation and the lenders named therein (the “Loan Agreement”), a copy of which is on file at the principal office of the Corporation, and designated as the Corporation’s 6% Convertible Notes DueJune 30, 2011 (the “Maturity Date”) in an aggregate principal amount (when taken together with the original principal amounts of all other Notes) which does not exceed Five Million U.S. Dollars (U.S. $5,000,000).

FOR VALUE RECEIVED, the Corporation hereby promises to pay to the order of _____________________________________________ or its registered assigns or successors-in-interest (“Holder”) the principal sum of ________________________________________  Dollars (U.S. $______), together with all accrued but unpaid interest thereon, if any, on the Maturity Date, to the extent such principal amount and interest has not been repaid or converted into the Corporation’s Common Stock, par value $0.001 per share (the “Common Stock”), in accordance with the terms hereof.

Interest on the unpaid and unconverted principal balance hereof shall accrue at the rate of 6% per annum from the date of original issuance hereof (the “Issuance Date”) until the same becomes due and payable on the Maturity Date, or such earlier date upon acceleration or by conversion, redemption or repayment in accordance with the terms hereof or of the other Agreements. Interest on this Note shall accrue daily commencing on the Issuance Date and shall be computed on the basis of a 360-day year, 30-day months and actual days elapsed and shall be payable in accordance with Section 1 hereof. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs, then to unpaid interest and fees and any remaining amount to principal.

1

All payments of principal and interest on this Note shall be made, at the Corporation’s option (i) in lawful money of the United States of America by wire transfer of immediately available funds to such account as the Holder may from time to time designate by written notice in accordance with the provisions of this Note or by company check, or (ii) paid in kind through adjustment of the Conversion Price. This Note may not be prepaid in whole or in part except as otherwise provided herein or in the Loan Agreement. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day (as defined below), the same shall instead be due on the next succeeding day which is a Business Day.

Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Loan Agreement. For purposes hereof the following terms shall have the meanings ascribed to them below:

“Bankruptcy Event” means any of the following events: (a) the Corporation or any subsidiary commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Corporation or any subsidiary thereof; (b) there is commenced against the Corporation or any subsidiary any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Corporation or any subsidiary is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Corporation or any subsidiary suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) the Corporation or any subsidiary makes a general assignment for the benefit of creditors; (f) the Corporation or any subsidiary fails to pay, or states that it is unable to pay or is unable to pay, its debts generally as they become due; (g) the Corporation or any subsidiary calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (h) the Corporation or any subsidiary, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City of New York are authorized or required by law or executive order to remain closed.

“Conversion Price” shall equal $4.00.

“Convertible Securities” means any convertible securities, warrants, options or other rights to subscribe for or to purchase or exchange for, shares of Common Stock.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

2

“Interest Payment Date” shall mean March 31^st, June 30^th September 30^th, and December 31^st of each year commencing on September 30, 2008, provided that if any such day is not a Business Day, then such Payment Date shall mean the immediately preceding day which is a Business Day.

“Per Share Selling Price” shall include the amount actually paid by any Person for each share of Common Stock in a sale or issuance by the Corporation. In the event a fee is paid by the Corporation in connection with such transaction directly or indirectly to such Person being sold or issued such securities or its affiliates (other than for transaction expenses up to $50,000), any such fee shall be deducted from the selling price pro rata to all shares sold in the transaction to arrive at the Per Share Selling Price. A sale of shares of Common Stock shall include the sale or issuance of rights, options, warrants or convertible, exchangeable or exercisable securities under which the Corporation is or may become obligated to issue shares of Common Stock, and in such circumstances the Per Share Selling Price of the Common Stock covered thereby shall also include the exercise, exchange or conversion price thereof (in addition to the consideration received by the Corporation upon such sale or issuance less the fee amount as provided above). In case of any such security issued in a Variable Rate Transaction or an MFN Transaction, the Per Share Selling Price shall be deemed to be the lowest conversion or exercise price at which such securities are converted or exercised or might have been converted or exercised in the case of a Variable Rate Transaction, or the lowest adjustment price in the case of an MFN Transaction, over the life of such securities. If shares are issued for a consideration other than cash, the Per Share Selling Price shall be the fair value of such consideration as determined in good faith by independent certified public accountants mutually acceptable to the Corporation and the Purchaser.

“Principal Amount” shall refer to the sum of (i) the original principal amount of this Note, (ii) all accrued but unpaid interest hereunder, and (iii) any default payments owing under the Agreements but not previously paid or added to the Principal Amount.

“Principal Market” shall mean the OTC Bulletin Board or such other principal market or exchange on which the Common Stock is then listed for trading.

“Registrable Securities” means shares of Common Stock issued by the Corporation upon conversion of this in accordance with the terms of this Note and the Loan Agreement.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Trading Day” shall mean a day on which there is trading on the Principal Market.

“Underlying Shares” means the shares of Common Stock into which the Notes are convertible (including interest or principal payments in Common Stock as set forth herein) in accordance with the terms hereof and the Loan Agreement.

“Variable Rate Transaction” shall mean a transaction in which the Corporation issues or sells, or agrees to issue or sell (a) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of, Common Stock either (x) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the Common Stock at any time after the initial issuance of such debt or equity securities, (y) with a fixed conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Corporation or the market for the Common Stock (but excluding standard stock split anti-dilution provisions), or (z) under a warrant exercisable for a number of shares based upon and/or varying with the trading prices of or quotations for the Common Stock at any time after the initial issuance of such warrant, or (b) any securities of the Corporation pursuant to an “equity line” structure whereby the Corporation may sell securities at future determined prices.

3

“VWAP” shall mean the daily dollar volume-weighted average sale price for the Common Stock on the Principal Market on any particular Trading Day during the period beginning at 9:30 a.m., New York City Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York City Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its “Volume at Price” functions or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York City Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York City Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest printed execution price and the lowest printed execution price reported in the “pink sheets” by the National Quotation Bureau, Inc. If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Corporation and the holders of at least a majority of the aggregate Principal Amount outstanding under the Notes. All such determinations of VWAP shall to be appropriately and equitably adjusted in accordance with the provisions set forth herein for any stock dividend, stock split, stock combination or other similar transaction occurring during any period used to determine the Conversion Price (or other period utilizing VWAPs).

The following terms and conditions shall apply to this Note:

Section 1.     Interest Payments. Subject to and in accordance with the terms of this Section 1, on each Interest Payment Date the Corporation shall pay to the Holder all interest accrued to date on the entire outstanding principal amount of this Note (“Interest Amount”). Subject to the terms hereof, the Corporation shall have the right to satisfy payment of the Interest Amount in full on each Interest Payment Date either in cash or in kind at the Corporation’s option. If the Corporation elects or is required to pay any Interest Amount in cash on an Interest Payment Date, then on such Interest Payment Date the Corporation shall pay to the Holder an amount equal to such Interest Amount in satisfaction of such obligation. If the Corporation elects to pay any Interest Amount in kind, the conversion price shall be adjusted as provided in Section 3. All holders of Notes must be treated the same with respect to such payment of the Interest Amount in cash or in kind. 

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Section 2.     SubsequentDebt. So long as any Principal Amount of Notes is outstanding, the Corporation and its subsidiaries shall not directly or indirectly, without the affirmative vote of the holders of at least 75% of the outstanding Principal Amount of the Notes then outstanding, incur or permit to exist additional indebtedness which is senior to the Notes, or incur, assume or permit to exist any lien, mortgage, security interest or encumbrance (other than statutory liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof) on any of its assets, except for (a) the security interest granted to the holders of the notes listed on Schedule 1 attached to the Loan Agreement, issued by the Corporation to the holders thereof, (b) indebtedness and liens currently outstanding pursuant to agreements as currently in effect on the Issuance Date, (c) indebtedness and liens pursuant to agreements for financing in which the proceeds shall be principally used for acquisitions by the Corporation of other businesses, and (d) capital leases, financing for equipment and purchase money security interests.

Section 3.     Conversion.

(a)      Voluntary Conversion Right. Subject to the terms hereof and restrictions and limitations contained herein, the Holder shall have the right, at such Holder’s option, at any time and from time to time to convert the outstanding Principal Amount under this Note in whole or in part by delivering to the Corporation a fully executed notice of conversion in the form of conversion notice attached hereto as Exhibit A (the “Conversion Notice”), which may be transmitted by facsimile or electronic transmission.

(b)      Common Stock IssuanceuponConversion.

(i)     Conversion Date Procedures. Upon conversion of this Note pursuant to Section 3(a) above, the outstanding Principal Amount hereunder shall be converted into such number of fully paid, validly issued and non-assessable shares of Common Stock, free of any liens, claims and encumbrances, as is determined by dividing the outstanding Principal Amount being converted by the then applicable Conversion Price. The date of any Conversion Notice hereunder shall be referred to herein as the “Conversion Date”. If a conversion under this Note cannot be effected in full for any reason, or if the Holder is converting less than all of the outstanding Principal Amount hereunder pursuant to a Conversion Notice, the Corporation shall promptly deliver to the Holder (but no later than five Trading Days after the Conversion Date) a Note for such outstanding Principal Amount as has not been converted if this Note has been surrendered to the Corporation for partial conversion. The Holder shall not be required to physically surrender this Note to the Corporation upon any conversion hereunder unless the full outstanding Principal Amount represented by this Note is being converted or repaid. The Holder and the Corporation shall maintain records showing the outstanding Principal Amount so converted and repaid and the dates of such conversions or repayments or shall use such other method, reasonably satisfactory to the Holder and the Corporation, so as not to require physical surrender of this Note upon each such conversion or repayment.

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(ii)     Stock Certificates or DWAC. The Corporation will deliver to the Holder not later than two (2) Trading Days after the Conversion Date, a certificate or certificates which shall be free of restrictive legends and trading restrictions, representing the number of shares of Common Stock being acquired upon the conversion of this Note.

(iii)Conversion Limitations.The Corporation shall not effect any conversion of this Note, and the Holder shall not have the right to convert any portion of this Note, pursuant to Section 3 or otherwise, to the extent that after giving effect to the issuance of Common Stock after conversion as set forth on the applicable Conversion Notice, the Holder (together with the Holder’s Affiliates, and any other person or entity acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, unconverted portion of this Note beneficially owned by the Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3(b)(iii), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Corporation is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 3(b)(iii) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Conversion Notice shall be deemed to be the Holder’s determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Note is convertible, in each case subject to the Beneficial Ownership Limitation, and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 3(b)(iii), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Corporation’s most recent periodic or annual report, as the case may be, (B) a more recent public announcement by the Corporation or (C) any other notice by the Corporation or the Corporation’s Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note. The Holder, upon not less than 61 days’ prior notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 3(b)(iii), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the provisions of this Section 3(b)(iii) shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Corporation. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3(b)(iii) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.

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(c)      Conversion Price Adjustments.

(i)Interest Paid in Kind. If the Corporation elects to pay any Interest Amount in kind as provided in Section 1 of this Note, the conversion price shall be adjusted to reflect the proportionate increase in the number of shares of Common Stock issuable to Holder on conversion after payment of the Interest Amount in full on the applicable Interest Payment Date. Any adjustment made pursuant to this Section 3(c)(i) shall become effective immediately after the applicable Interest Payment Date.

(ii)     Stock Dividends, Splits and Combinations. If the Corporation or any of its subsidiaries, at any time while the Notes are outstanding (A) shall pay a stock dividend or otherwise make a distribution or distributions on any equity securities (including instruments or securities convertible into or exchangeable for such equity securities) in shares of Common Stock, (B) subdivide outstanding Common Stock into a larger number of shares, or (C) combine outstanding Common Stock into a smaller number of shares, then the Conversion Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 3(c)(ii) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination.

(iii)     Distributions. If the Corporation or any of its subsidiaries, at any time while the Notes are outstanding, shall distribute to all holders of Common Stock evidences of its indebtedness or assets or cash or rights or warrants to subscribe for or purchase any security of the Corporation or any of its subsidiaries (excluding those referred to in Section 3(c)(i) above), then concurrently with such distributions to holders of Common Stock, the Corporation shall distribute to holders of the Notes the amount of such indebtedness, assets, cash or rights or warrants which the holders of Notes would have received had all their Notes been converted into Common Stock at the Conversion Price.

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(iv)     Common Stock Issuances.  For a period commencing on the date of the Loan Agreement and continuing until the second anniversary thereof, if the Corporation or any of its subsidiaries (A) issues or sells any Common Stock or Convertible Securities, or (B) directly or indirectly effectively reduces the conversion, exercise or exchange price for any Convertible Securities which are currently outstanding (other than pursuant to terms existing on the date hereof), at or to an effective Per Share Selling Price (the “Lower Per Share Selling Price”) which is less than the then applicable Conversion Price, then in each such case, the Conversion Price in effect immediately prior to such issue or sale or record date shall be automatically reduced effective concurrently with such issue or sale to the Lower Per Share Selling Price (which figure shall be appropriately and equitably adjusted as provided herein for stock splits, stock dividends, and similar events).

The foregoing provisions of this subsection shall not apply to issuances or sales of (x) Common Stock upon conversion, exercise or exchange of Convertible Securities outstanding on the issuance date hereof in accordance with the terms in effect on such issuance date, (y) Common Stock or Convertible Securities under the Corporation’s duly adopted stock option and bonus plans for employees and directors, or (z) Common Stock or Convertible Securities issued in a merger/acquisition transaction to which the Corporation is a party. For the purposes of the foregoing adjustments, in the case of the issuance of any Convertible Securities, the maximum number of shares of Common Stock issuable upon exercise, exchange or conversion of such Convertible Securities shall be deemed to be outstanding, provided that no further adjustment shall be made upon the actual issuance of Common Stock upon exercise, exchange or conversion of such Convertible Securities. For purposes of this Section 3(c)(iv), if an event occurs that triggers more than one of the above adjustment provisions, then only one adjustment shall be made and the calculation method which yields the greatest downward adjustment in the affected Conversion Price shall be used.

(v)     Rounding of Adjustments. All calculations under this Section 3 or Section 1 shall be made to 4 decimal places for dollar amounts or the nearest 1/100th of a share, as the case may be.

(vi)     Notice of Adjustments. Whenever any affected Conversion Price is adjusted pursuant to Section 3(c)(i), (ii) or (iii) above, the Corporation shall promptly deliver to each holder of the Notes, a notice setting forth the affected Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment, provided that any failure to so provide such notice shall not affect the automatic adjustment hereunder.

(vii)Notice of Certain Events.   If:

A.	the Corporation shall declare a dividend (or any other distribution) on its Common Stock; or
B.	the Corporation shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or

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C. the Corporation shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or

D. the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock of the Corporation, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, provided that such approval shall not be require in connection with any transaction in which the proceeds shall be principally used for acquisitions by the Corporation of other businesses; or

E. the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation;

then the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be either (i) emailed or (ii) mailed to the Holder at its last address as it shall appear upon the books of the Corporation, on or prior to the date notice to the Corporation’s stockholders generally is given, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange.

(d)      Reservation and Issuance of Underlying Securities. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Note (including repayments in stock), free from preemptive rights or any other actual contingent purchase rights of persons other than the holders of the Notes, not less than such number of shares of Common Stock as shall be issuable (taking into account the adjustments under this Section 3) upon the conversion of this Note hereunder in Common Stock (including repayments in stock). The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid, nonassessable and freely tradable.

(e)      No Fractions. Upon a conversion hereunder the Corporation shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the closing price of a share of Common Stock at such time. If the Corporation elects not, or is unable, to make such cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

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(f)      Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the conversion of this Note (including repayment in stock) shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Corporation, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the Holder, this Note when surrendered for conversion shall be accompanied by an assignment form; and providedfurther, that the Corporation shall not be required to pay any tax or taxes which may be payable in respect of any such transfer.

(g)      Cancellation. After all of the Principal Amount (including accrued but unpaid interest and default payments at any time owed on this Note) have been paid in full or converted into Common Stock, this Note shall automatically be deemed canceled and the Holder shall promptly surrender the Note to the Corporation at the Corporation’s principal executive offices.

(h)      Forced Conversion. Subject to the terms hereof, the Corporation shall have the right to compel the Holder to convert up to 100% of the principal amount of Notes then held by the Holder by delivering a written notice (a “Forced Conversion Notice”) to the Holder; provided that (1) such Forced Conversion Notice must specify the principal amount of Notes to be converted, and (2) all Holders of Notes shall be treated proportionately with respect to the Corporation’s election to force conversion of the Notes pursuant to this provision. Such conversion shall be effective on the date of such Forced Conversion Notice. Such forced conversion shall be subject to and governed by all the provisions relating to voluntary conversion of this Note contained herein. Notwithstanding anything contained herein, the Corporation shall not be entitled to exercise any forced conversion right set forth in this subsection 3(j) unless at the effective date of the Forced Conversion (i) the resale of all Underlying Shares is covered by an effective registration statement, which registration statement is not subject to any suspension or stop orders, or any such Underlying Shares may be sold pursuant to Rule 144 (or any successor provision) of the Securities Act; (ii) the requisite number of shares of Common Stock has been duly authorized and reserved for issuance as required by the terms of this Note; (iii) the VWAP on each Trading Day is greater than $7.00; (iv) none of the Corporation or any direct or indirect subsidiary of the Corporation shall be subject to any bankruptcy, insolvency or similar proceeding; and (viii) the average daily trading volume for the preceding fifteen (15) Trading Days exceeds 50,000.

Section 4. Defaults and Remedies.

(a)      Events of Default. An “Event of Default” is: (i) a default in payment of any amount due hereunder which default continues for more than five (5) Business Days after the due date thereof; (ii) a default in the timely issuance of Underlying Shares upon and in accordance with terms hereof, which default continues for five (5) Business Days after the Corporation has received written notice informing the Corporation that it has failed to issue shares or deliver stock certificates within the fifth day following the Conversion Date; (iii) failure by the Corporation for fifteen (15) days after written notice has been received by the Corporation to comply with any material provision of any of the Notes, the Loan Agreement, or the Warrants issued pursuant to the Loan Agreement (the “Warrants”) (including without limitation the failure to issue the requisite number of shares of Common Stock upon conversion hereof or of the Warrants; (iv) a material breach by the Corporation of its representations or warranties in the Loan Agreement or the Warrants; (v) any default after any cure period under, or acceleration prior to maturity of, any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Corporation for in excess of $200,000 or for money borrowed the repayment of which is guaranteed by the Corporation for in excess of $200,000, whether such indebtedness or guarantee now exists or shall be created hereafter; or (vi) if the Corporation is subject to any Bankruptcy Event.

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(b)      Remedies. If an Event of Default occurs and is continuing with respect to any of the Notes, the Holder may declare all of the then outstanding Principal Amount of this Note and all other Notes held by the Holder, including any interest due thereon, to be due and payable immediately, except that in the case of an Event of Default arising from events described in clauses (v) and (vi) of Section 4(a), this Note shall become due and payable without further action or notice.

Section 5. Notice Procedures. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Conversion Notice, shall be in writing and either (i) emailed or (ii) delivered personally, by confirmed facsimile, or by a nationally recognized overnight courier service to the Corporation at the facsimile telephone number or address of the Corporation specified in the Loan Agreement. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and either (x) emailed or (y) delivered personally, by facsimile, or by a nationally recognized overnight courier service addressed to the Holder at the facsimile telephone number or address of the Holder appearing on the books of the Corporation, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed delivered (i) upon receipt, when emailed or delivered personally, (ii) when sent by facsimile, upon receipt if received on a Business Day prior to 5:00 p.m. (Eastern Time), or on the first Business Day following such receipt if received on a Business Day after 5:00 p.m. (Eastern Time) or (iii) upon receipt, when deposited with a nationally recognized overnight courier service.

Section 8.     General.

(a)      Payment of Expenses. The Corporation agrees to pay all reasonable charges and expenses, including attorneys’ fees and expenses, which may be incurred by the Holder in successfully enforcing this Note and/or collecting any amount due under this Note.

(b)      Amendment. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Corporation and the Holder.

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(c)      Assignment, Etc. The Holder may assign or transfer this Note to any transferee only with the prior written consent of the Corporation, which may not be unreasonably withheld or delayed, provided that (i) the Holder may assign or transfer this Note to any of such Holder’s affiliates without the consent of the Corporation and (ii) upon any Event of Default, the Holder may assign or transfer this Note without the consent of the Corporation. The Holder shall notify the Corporation of any such assignment or transfer promptly. This Note shall be binding upon the Corporation and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns.

(d)      No Waiver. No failure on the part of the Holder to exercise, and no delay in exercising any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Holder of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. Each and every right, remedy or power hereby granted to the Holder or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by the Holder from time to time.

(e)      Governing Law; Jurisdiction. THIS NOTE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD DEFER TO THE SUBSTANTIVE LAWS OF ANOTHER JURISDICTION. The Corporation irrevocably submits to the exclusive jurisdiction of any State or Federal Court sitting in the State of New York, County of New York, over any suit, action, or proceeding arising out of or relating to this Note. The Corporation irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action, or proceeding brought in such a court and any claim that suit, action, or proceeding has been brought in an inconvenient forum. The Corporation agrees that the service of process upon it mailed by certified or registered mail (and service so made shall be deemed complete three days after the same has been posted as aforesaid) or by personal service shall be deemed in every respect effective service of process upon it in any such suit or proceeding. Nothing herein shall affect Holder’s right to serve process in any other manner permitted by law. The Corporation agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner.

(f)      Replacement Notes. This Note may be exchanged by Holder at any time and from time to time for a Note or Notes with different denominations representing an equal aggregate outstanding Principal Amount, as reasonably requested by Holder, upon surrendering the same. No service charge will be made for such registration or exchange. In the event that Holder notifies the Corporation that this Note has been lost, stolen or destroyed, a replacement Note identical in all respects to the original Note (except for registration number and Principal Amount, if different than that shown on the original Note), shall be issued to the Holder, provided that the Holder executes and delivers to the Corporation an agreement reasonably satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with the Note.

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Signatures on the following page.

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IN WITNESS WHEREOF, the Corporation has caused this Note to be duly executed on the day and in the year first above written.

PET EXPRESS SUPPLY, INC.

By:

Jonathan Bomser

Chief Executive Officer

                                                                                      

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EXHIBIT A

FORM OF CONVERSION NOTICE

(To be executed by the Holderin order to convert aNote)

Re:    6% Convertible Note (“Note”) issued by PET EXPRESS SUPPLY, INC. to _____________________ in the original principal amount of $.

The undersigned hereby elects to convert the aggregate outstanding Principal Amount (as defined in the Note)indicated below of this Noteinto shares of Common Stock, par value $0.001 per share (the “Common Stock”), of PET EXPRESS SUPPLY, INC. (the “Corporation”) according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Corporation in accordance therewith.

No fee will be charged to the holder for any conversion, except for such transfer taxes, if any. The undersigned represents as of the date hereof that, after giving effect to the conversion of this Notepursuant to this Conversion Notice, the undersigned will not exceed the “Restricted Ownership Percentage” contained in Section 3(i)of this Note. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed thereto in the Note.

To the extent the undersigned intends to sell the Underlying Shares issued to the undersigned upon conversion of this Note pursuant to a Registration Statement, the undersigned agrees to comply with all applicable prospectus delivery requirements under the 1933 Act with respect to such sale.

Conversion information:
	Date to Effect Conversion
	Aggregate Principal Amount  of NoteBeing Converted
	Number of Shares of Common Stock to be Issued
	Applicable Conversion Price
	Signature
	Address

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EX-10.1

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT dated July 25, 2008 by and among PET EXPRESS SUPPLY, INC., a corporation organized and in good standing in the State of Nevada (the “Corporation”), whose address is 59 West 19^th Street, 6^th Floor, New York, NY 10011;MKM OPPORTUNITY MASTER FUND, LTD. (“MKM”); and those Persons who have executed or shall subsequently execute this Agreement under the heading “Additional Lenders”. MKM and the Additional Lenders are sometimes collectively referred to herein as “Lender” or the “Lenders”.

WHEREAS, Lender wishes to lend to the Corporation, and the Corporation wishes to borrow from Lender and repay Lender on the terms set forth herein.

Now, therefore, the parties agree as follows:

1.LOAN AND TERMS OF PAYMENT.

(a)The Corporation shall borrow from Lenders hereunder an aggregate principal amount which does not exceed Five Million U.S. Dollars (U.S. $5,000,000). All loans made by Lenders hereunder shall be evidenced by Notes (as hereinafter defined), to be executed and delivered by the Corporation to the applicable Lender on the closing date of such loan. Such loan shall be repaid in accordance with the terms of the Note, and will be convertible as provided in the Note.

(b)The Corporation promises to pay Lender the unpaid principal amount of all loans made by any of the Lenders hereunder and interest on the unpaid principal amount thereof in accordance with the terms of the Notes.

(c) Loans made hereunder accrue interest on the outstanding principal balance thereof in accordance with the applicable Note at a per annum rate of six percent (6%). Interest on the unpaid and unconverted principal balance of each of the Notes shall accrue at the rate of 6% per annum from the date of original issuance thereof (the “Issuance Date”) until the same becomes due and payable on the Maturity Date, or such earlier date upon acceleration or by conversion, redemption or repayment in accordance with the terms hereof or of the other Agreements. Interest on each of the Notes shall accrue daily commencing on the Issuance Date and shall be computed on the basis of a 360-day year, 30-day months and actual days elapsed and shall be payable in accordance with the terms of the applicable Note.

2.WARRANTS. The Corporation hereby grants to each of the Lenders warrants pursuant to which each Lender may purchase Common Stock, $0.001 par value per share, of PETX (“Shares”) up to a maximum amount of Shares equal to seventy-five (75%) percent of the number of Shares into which such Lender’s Note may be converted, at an exercise price of $4.50 per Share. The warrants will be in the form attached hereto as Exhibit B.

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3.PREPAYMENT. The Corporation shall prepay (such payment a “Mandatory Prepayment”) all or part of the Notes then outstanding in the event that Corporation shall complete, subsequent to the consummation of the transactions contemplated in this Agreement, an offering or offerings of new equity or an instrument convertible into equity, and the proceeds of such financing(s) shall exceed $4,000,000, in which case all of the proceeds of such financing(s) in excess of $4,000,000 shall be used to prepay the Notes, with all holders of Notes prepaid proportionately with respect to the Mandatory Prepayment pursuant to this provision. The Corporation shall deliver to each of the Lenders a written notice (a “Prepayment Notice”), specifying the principal amount of Notes to be prepaid, and each of the holders of Notes shall have the right to voluntarily convert. Such notice must be given no less than ten (10) Business Days prior to the effective date of such Mandatory Prepayment (the “Prepayment Date”), and each holder of a Note shall have the right to voluntarily convert such Note prior to the Prepayment Date.

4. GRANT OF SECURITY INTEREST

4.1GRANT OF SECURITY INTEREST. The Corporation grants Lender a continuing security interest in all presently existing and later acquired Collateral to secure all Obligations and performance of each of the Corporation’s duties under the Loan Documents. Except for Permitted Liens, such security interest will be a first priority security interest in the Collateral. If this Agreement is terminated, Lender’s lien and Lender’s security interest in the Collateral will continue until the Corporation fully satisfies its Obligations.

4.2 AUTHORIZATION TO FILE. TheCorporation authorizes Lender to file financing statements without notice to Corporation, with all appropriate jurisdictions within the United States, as Lender deems appropriate, in order to perfect or protect Lender’s interest in the Collateral. Lender agrees that it shall, upon the request of the Corporation, following the termination of the Term Loan and the payment in full of the Obligations (a) terminate all such financing statements and (b) take such other action to evidence termination of the Lender’s Security Interest as Corporation may reasonably request.

5. REPRESENTATIONS AND WARRANTIES . The Corporation represents and warrants as follows:

5.1 DUE ORGANIZATION AND AUTHORIZATION. The Corporation and each Subsidiary is duly existing and in good standing in its state of incorporation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified, except where the failure to do so would not reasonably be expected to cause a Material Adverse Change. The Corporation and each Subsidiary’s exact legal name are as set forth on the first page of this Agreement. The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with the Corporation’s formation documents, nor constitute an event of default under any material agreement by which Corporation is bound. The Corporation is not in default under any agreement to which, or by which it is bound, in which the default would reasonably be expected to cause a Material Adverse Change.

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5.2 COLLATERAL. The Corporation has good title to the Collateral, free of Liens except Permitted Liens. The Accounts are bona fide, existing obligations, and the service or property has been performed or delivered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor. Corporation has no notice of any actual or imminent Insolvency Proceeding of any account debtor. All Inventory is in all material respects of good and marketable quality, free from material defects

5.3 LITIGATION. Except as shown in the Schedule, there are no actions or proceedings pending or, to the knowledge of the Corporation’s Responsible Officers, threatened by or against the Corporation or any Subsidiary in which a likely adverse decision would reasonably be expected to cause a Material Adverse Change.

5.4 FINANCIAL STATEMENTS. All consolidated financial statements for the Corporation, and any Subsidiary, delivered to Lender fairly present in all material respects the Corporation’s consolidated financial condition and Corporation’s consolidated results of operations as of the date and for the period then ended. There has not been any Material Adverse Change in the Corporation’s consolidated financial condition since the date of the most recent consolidated financial statements submitted to Lender.

5.5 REGULATORY COMPLIANCE. The Corporation is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act. Corporation is not engaged as one of its important activities in extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of Governors). To its knowledge, the Corporation has complied in all material respects with the Federal Fair Labor Standards Act. The Corporation has not violated any laws, ordinances or rules, the violation of which would reasonably be expected to cause a Material Adverse Change. None of the Corporation’s or any Subsidiary’s properties or assets has been used by Corporation or any Subsidiary, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. The Corporation and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP. The Corporation and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted, except where the failure to do so would not reasonably be expected to cause a Material Adverse Change.

5.6 SUBSIDIARIES. The Corporation does not own any stock, partnership interest or other equity securities except for its investment in its sole subsidiary, C J Vision Enterprises, Inc.

5.7 FULL DISCLOSURE. No written representation, warranty or other statement of the Corporation in any certificate or written statement given to Lender (taken together with all such written certificates and written statements to Lender) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Lender that the projections and forecasts provided by the Corporation in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected and forecasted results).

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6.CONDITION OF CLOSING; AFFIRMATIVE COVENANTS. The Corporation will do all of the following for so long as Lender has an obligation to make any Advance, or there are outstanding Obligations:

6.1CONDITION OF CLOSING. The obligation of Lenders to enter into this Agreement and to consummate the transactions contemplated herein shall be conditioned on (i) the prior consummation of the Exchange Agreement dated July 25, 2008 by and among the Corporation, C J Vision Enterprises, Inc., a Delaware corporation, and the other parties thereto; and (ii) the loan of an aggregate principal amount of no less than $800,000 by the Lenders hereunder.

6.2 LENDER’S RIGHT TO PARTICIPATE IN FUTURE FINANCING. For a period commencing on the date hereof and continuing until the second anniversary of this Agreement, each of the Lenders shall have the right to participate in any financing transaction by the Corporation, to the extent required to maintain such Lender’s proportionate stake on a fully diluted basis.

6.3GOVERNMENT COMPLIANCE. The Corporation will maintain its and all Subsidiaries legal existence and good standing as a Registered Organization in their respective states of incorporation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to cause a material adverse effect on the Corporation’s business or operations. The Corporation will comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which would reasonably be expected to cause a Material Adverse Change.

6.4 TAXES. The Corporation will make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments (other than taxes and assessments which the Corporation is contesting in good faith, with adequate reserves maintained in accordance with GAAP).

6.5 INSURANCE. The Corporation will keep its business and the Collateral insured for risks and in amounts as the Board of Directors shall reasonably determine in good faith; provided, however, that the risks covered and the amount of coverage shall not be less than in effect on the date hereof. Insurance policies will be in a form and with companies as the Board of Directors of the Corporation shall determine in good faith consistent with past practice.

6.6 FURTHER ASSURANCES. The Corporation will execute any further instruments and take further action as Lender reasonably requests to perfect or continue Lender’s security interest in the Collateral or to effect the purposes of this Agreement.

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7.NEGATIVE COVENANTS.The Corporation will not do any of the following without Lender’s prior written consent, for so long as there are any outstanding Obligations:

7.1 DISPOSITIONS.Convey, sell, lease, transfer or otherwise dispose of (collectively “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of the Collateral, except for Transfers (a) of Inventory in the ordinary course of business; (b) of licenses and similar arrangements for the use of the property of the Corporation or its Subsidiaries in the ordinary course of business; or (b) of worn-out, obsolete or fully depreciated Equipment.

7.2 SUBSEQUENT DEBT. So long as any Principal Amount of Notes is outstanding, the Corporation and its subsidiaries shall not directly or indirectly, without the affirmative vote of the holders of at least 75% of the outstanding Principal Amount of the Notes then outstanding, incur or permit to exist additional indebtedness which is senior to the Notes, or incur, assume or permit to exist any lien, mortgage, security interest or encumbrance (other than statutory liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof) on any of its assets, except for Permitted Liens.

8. EVENTS OF DEFAULT.Any one of the following is an Event of Default:

8.1 PAYMENT DEFAULT. If the Corporation fails to pay any of the Obligations within five (5) days after their due date.

8.2 COVENANT DEFAULT. If the Corporation does not perform any obligation in Section 6 or violates any covenant in Section 7 or if the Corporation does not perform or observe any other material term, condition or covenant in this Agreement, any Loan Documents, or in any agreement between the Corporation and Lender and as to any failure to perform or observe, violation or default under a term, condition or covenant that can be cured, has not cured the default within ten (10) days after it comes to the attention of an officer of the Corporation, or if the failure to perform or observe, violation or default under a term, condition or covenant cannot be cured within ten (10) days or cannot be cured after the Corporation’s attempts within such ten (10) day period, and the default may be cured within a reasonable time, then the Corporation has an additional period (of not more than thirty (30) days) to attempt to cure the default. During the additional time, the failure to cure the default is not an Event of Default.

8.3 MATERIAL ADVERSE CHANGE. If there (i) occurs a material adverse change in the business, operations, or condition (financial or otherwise) of the Corporation and its Subsidiaries taken as a whole, or (ii) is a material impairment of Corporation’s ability to repay the outstanding Obligations in their entirety or (iii) is a material impairment of the value or priority of Lender’s security interests in the Collateral;

8.4 ATTACHMENT. If any material portion of the Corporation’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy is not removed in thirty (30) days, or if the Corporation is enjoined, restrained, or prevented by court order from conducting a material part of its business or if a judgment or other claim becomes a Lien on a material portion of the Corporation’s assets, or if a notice of lien, levy, or assessment is filed against any of Corporation’s assets by any government agency and not paid within thirty (30) days after the Corporation receives notice. These are not Events of Default if stayed or if a bond is posted pending contest by the Corporation;

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8.5 INSOLVENCY. If the Corporation becomes insolvent or if the Corporation begins an Insolvency Proceeding or an Insolvency Proceeding is begun against the Corporation and not dismissed or stayed within sixty (60) days;

8.6 OTHER AGREEMENTS. If there is a default in any agreement between the Corporation and a third party that gives the third party the right to accelerate any Indebtedness

exceeding $250,000 or that would cause a Material Adverse Change;

8.7 JUDGMENTS. If a money judgment(s) in the aggregate of at least $250,000 is rendered against the Corporation and is unsatisfied and unstayed for thirty (30) days;

8.8 MISREPRESENTATIONS. If the Corporation or a Responsible Officer makes any material misrepresentation or material misstatement now or later in any warranty or representation in this Agreement or in any writing delivered to Lender or to induce Lender to enter this Agreement or any Loan Document;

8.9 SUBSIDIARIES. If any circumstance described in Sections 8.3, 8.4, 8.5 or 8.7 occurs to any Subsidiary of the Corporation which results in a Material Adverse Change to the Corporation and its Subsidiaries taken as a whole;

9. LENDER’S RIGHTS AND REMEDIES

9.1 RIGHTS AND REMEDIES. When an Event of Default occurs and continues Lender may, without notice or demand, do any or all of the following:

(a) Declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Lender);

(b) Settle or adjust disputes and claims directly with account debtors for amounts, on terms and in any order that Lender considers advisable;

(c) Make any payments and do any acts it considers necessary or reasonable to protect its security interest in the Collateral. The Corporation will assemble the Collateral if Lender requires and make it available as Lender designates. Lender may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. The Corporation grants Lender a license to enter and occupy any of its premises, without charge, to exercise any of Lender’s rights or remedies;

(d) Apply to the Obligations any amount held by Lender owing to or for the credit or the account of the Corporation;

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(e) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Lender is granted a non-exclusive, royalty-free license or other right to use, without charge, the Corporation’s rights in its labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Lender’s exercise of its rights under this Section, the Corporation’s rights under all licenses and all franchise agreements inure to Lender’s benefit; provided, however, that (i) Lender shall act in good faith to preserve the value of any property it shall use pursuant to such license or right in the exercise of its remedies hereunder, and (ii) upon the completion of the sale of all collateral by Lender and the completion by Lender of its exercise of its remedies hereunder, such license shall terminate);

(f) Dispose of the Collateral according to the Code.

9.2 ACCOUNTS COLLECTION. When an Event of Default occurs and continues, Lender may notify any Person owing the Corporation money of Lender’s security interest in the funds and verify the amount of the Account. Corporation must collect all payments in trust for Lender and, if requested by Lender, immediately deliver the payments to Lender in the form received from the account debtor, with proper endorsements for deposit.

9.3 LENDER’S LIABILITY FOR COLLATERAL. If Lender complies with reasonable lending practices and the Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other person. The Corporation bears all risk of loss, damage or destruction of the Collateral.

9.4 REMEDIES CUMULATIVE. Lender’s rights and remedies under this Agreement, the Loan Documents, and all other agreements are cumulative. Lender has all rights and remedies provided under the Code, by law, or in equity. Lender’s exercise of one right or remedy is not an election, and Lender’s waiver of any Event of Default is not a continuing waiver. Lender’s delay is not a waiver, election, or acquiescence. No waiver is effective unless signed by Lender and then is only effective for the specific instance and purpose for which it was given.

9.5 DEMAND WAIVER. The Corporation waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Lender on which the Corporation is liable.

10. NOTICES. All notices or demands by any party about this Agreement or any other related agreement must be in writing and be sent by personal delivery, by a nationally recognized overnight delivery service, or by certified mail, postage prepaid, return receipt requested, to the address, in the case of the Corporation, set forth at the beginning of this Agreement, and in the case of Lenders, to each Lender’s addresses on the books of the Corporation, and shall be deemed to have been given: (a) if delivered in person, when delivered; (b) if delivered by recognized national overnight delivery service, one Business Day after delivery to such courier properly addressed; or (c) if by certified U.S. Mail, four Business Days after depositing in the United States mail, with postage prepaid and properly addressed. A party may change its notice address by giving the other party written notice.

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11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER. New York law governs the Loan Documents without regard to principles of conflicts of law. The Corporation and each of the Lenders each submit to the exclusive jurisdiction of the State and Federal courts in the State of New York provided, however, that if for any reason the Lender can not avail itself of the courts of the State of New York, Corporation and Lender each submit to the jurisdiction of the State and Federal Courts in New York County, New York.

12. GENERAL PROVISIONS

12.1 SUCCESSORS AND ASSIGNS. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. The Corporation may not assign this Agreement or any rights under it without Lender’s prior written consent which may be granted or withheld in Lender’s discretion. Lender has the right, without the consent of or notice to the Corporation, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Lender’s obligations, rights and benefits under this Agreement.

12.2 INDEMNIFICATION. The Corporation will indemnify, defend and hold harmless Lender and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Lender Expenses incurred, or paid by Lender from, following, or consequential to transactions between Lender and the Corporation (including reasonable attorneys fees and expenses), except for losses or Lender Expenses caused by Lender’s gross negligence or willful misconduct.

12.3 SEVERABILITY OF PROVISION. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

12.4 AMENDMENTS IN WRITING, INTEGRATION. All amendments to this Agreement must be in writing and signed by the Corporation and Lender. This Agreement represents the entire agreement about this subject matter, and supersedes prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement merge into this Agreement and the Loan Documents.

12.5 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one Agreement.

12.6 SURVIVAL. All covenants, representations and warranties made in this Agreement continue in full force while any Obligations remain outstanding. The obligations of the Corporation in Section 12.2 to indemnify Lender will survive until all statutes of limitations for actions that may be brought against Lender have run.

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12.7 CONFIDENTIALITY. In handling any confidential information, Lender will exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made (i) to Lender’s subsidiaries or affiliates in connection with their business with the Corporation, (ii) to prospective transferees or purchasers of any interest in the loans (provided, however, Lender shall use commercially reasonable efforts in obtaining such prospective transferee or purchasers agreement of the terms of this provision), (iii) as required by law, regulation, subpoena, or other order after notice to the Corporation and provided that such disclosure is subject to a protective order, if one is available, (iv) as required in connection with Lender’s examination or audit and (v) as Lender reasonably considers appropriate exercising remedies under this Agreement. Confidential information does not include information that either: (a) is publicly available or in Lender’s possession when disclosed to Lender, or becomes part of the public domain after disclosure to Lender; or (b) is disclosed to Lender by a third party, unless that third party is permitted to disclose the information.

DEFINITIONS

In this Agreement:

“ACCOUNTS” has the meaning set forth in the Code and includes all existing and later arising accounts, contract rights, and other obligations owed Corporation in connection with its sale or lease of goods (including licensing intellectual property or software and other technology) or provision of services, all credit insurance, guaranties, other security and all merchandise returned or reclaimed by the Corporation and the Corporation’s Books relating to any of the foregoing.

“AFFILIATE” of a Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.

“LENDER EXPENSES” are all audit fees and expenses and reasonable costs and expenses (including reasonable attorneys’ fees and expenses) for enforcing the Loan Documents (including appeals or Insolvency Proceedings); for the avoidance of doubt, attorneys’ fees and expenses incurred in connection with the preparation and negotiation of the Loan Documents shall be deemed not to be Lender Expenses.

“CORPORATION’S BOOKS” are all the Corporation’s books and records including ledgers, records regarding the Corporation’s assets or liabilities, the Collateral, business operations or financial condition and all computer programs or discs or any equipment containing the information.

“BUSINESS DAY” is any day that is not a Saturday, Sunday or a day on which the national banks are generally closed.

“CLOSING DATE” is the date of this Agreement.

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“CODE” is the Uniform Commercial Code, in effect in the State of New York as in effect from time to time.

“COLLATERAL” is all of the Corporation’s assets, whether now owned or existing or hereafter acquired or arising and wherever located.

“CONTINGENT OBLIGATION” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (i) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (ii) any obligations for undrawn letters of credit for the account of that Person; and (iii) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under the guarantee or other support arrangement.

“COPYRIGHTS” are all copyright rights, applications or registrations and like protections in each work or authorship or derivative work, whether published or not (whether or not it is a trade secret) now or later existing, created, acquired or held.

“CREDIT EXTENSION” is each Advance, the Term Loan, or any other extension of credit by Lender for the Corporation’s benefit pursuant hereto.

“EQUIPMENT” has the meaning set forth in the Code and includes is all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which the Corporation has any interest.

“ERISA” is the Employment Retirement Income Security Act of 1974, and its regulations.

“EVENT OF DEFAULT” has the meaning set forth in Section 7.

“GAAP” is United States generally accepted accounting principles.

“INDEBTEDNESS” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and (d) Contingent Obligations.

“INSOLVENCY PROCEEDING” are proceedings by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

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“INVENTORY” has the meaning set forth in the Code and includes is present and future inventory in which the Corporation has any interest, including merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or later owned by or in the custody or possession, actual or constructive, of the Corporation, including inventory temporarily out of its custody or possession or in transit and including returns on any accounts or other Proceeds from the sale or disposition of any of the foregoing and any documents of title.

“INVESTMENT” is any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person.

“LIEN” is a mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance.

“LOAN DOCUMENTS” are, collectively, this Agreement, the Notes, any note, or notes or guaranties executed by the Corporation, and any other present or future agreement between the Corporation and/or for the benefit of Lender in connection with this Agreement, all as amended, extended or restated.

“MATERIAL ADVERSE CHANGE” has the meaning set forth in Section 6.3.

“NOTE” means each of the 6% Convertible Notes executed by the Corporation in favor of each of the Lenders hereunder, in the form attached hereto as Exhibit A, together with all renewals, amendments, modifications and substitutions therefor.

“OBLIGATIONS” are loans made hereunder, interest, Lender Expenses and other amounts Corporation owes Lender, including cash management services, letters of credit and foreign exchange contracts, if any and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of the Corporation assigned to Lender.

“PATENTS” are patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.

“PERMITTED INDEBTEDNESS” is:

(a) The Corporation’s indebtedness to Lender under this Agreement or any other Loan Document;

(b) Indebtedness existing on the Closing Date and shown on the Schedule 1;

(c) Subordinated Debt;

(d) Indebtedness to trade creditors incurred in the ordinary course of business; and

(e) Indebtedness secured by Permitted Liens.

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“PERMITTED LIENS” are:

(a)The security interest granted to the holders of the notes listed on Schedule 1 attached to this Agreement, issued by the Corporation to the holders thereof;

(b)Indebtedness and liens currently outstanding pursuant to agreements as currently in effect on the date of this Agreement;

(c)Indebtedness and liens pursuant to agreements for financing in which the proceeds shall be principally used for acquisitions by the Corporation of other businesses;

(d) Capital leases, financing for equipment and purchase money security interests;

(e)Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which the Corporation maintains adequate reserves on its Books, if they have no priority over any of Lender’s security interests;

(f)Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Permitted Liens described above, but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase.

“PERSON” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company association, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.

“PROCEEDS” has the meaning described in the Code as in effect from time to time.

“REGISTERED ORGANIZATION” means an organization organized solely under the law of a single state or the United States and as to which the state or the United States must maintain a public record showing the organization to have been organized.

“RESPONSIBLE OFFICER” is each of the Chief Executive Officer, the President, and the Chief Financial Officer of the Corporation.

“SCHEDULE” is any attached schedule of exceptions.

“SUBORDINATED DEBT” is debt incurred by the Corporation that is subordinated to the Corporation’s indebtedness owed to Lender and which is reflected in a written agreement in a manner and form acceptable to Lender and approved by Lender in writing.

“SUBSIDIARY” is for any Person, or any other business entity of which more than 50% of the voting stock or other equity interests is owned or controlled, directly or indirectly, by the Person or one or more Affiliates of the Person.

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“SUPPORTING OBLIGATION” means a Letter-of-credit right, secondary obligation or obligation of a secondary obligor or that supports the payment or performance of an account, chattel paper, a document, a general intangible, an instrument or investment property.

“TOTAL LIABILITIES” is on any day, obligations that should, under GAAP, be classified as liabilities on the Corporation’s consolidated balance sheet, including all Indebtedness, and current portion Subordinated Debt allowed to be paid, but excluding all other Subordinated Debt.

“TRADEMARKS” are trademark and service mark rights, registered or not, applications to register and registrations and like protections, and the entire goodwill of the business of the Corporation connected with the trademarks.

[Signatures appear on the following page]

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first above written.

CORPORATION: 

PET EXPRESS SUPPLY, INC. 

By: 

Jonathan Bomser

Chief Executive Officer

LENDERS: 

MKM OPPORTUNITY MASTER FUND, LTD. 

By: 

Name:
Title:  

ADDITIONAL LENDERS 

By: 

Name:
Title:

By: 

Name:
Title:  

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