UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



Form 10-K



x ANNUAL REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended December
31, 2012



£TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Commission file number 001-33300



ALL AMERICAN PET COMPANY, INC.



(Exact name of registrant as specified in its charter)



|Nevada                                                          |  | 91-2186665                          
|--------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation 
or organization) |  | (I.R.S. Employer Identification No.)



|1100 Glendon Avenue, 17th Floor          |  |           
|---------------------------------------- |  | ----------
|Los Angeles, California 90024            |  | 90024     
|(Address of principal executive offices) |  | (Zip Code)



Registrant's telephone number:  
(310) 689-7355



Securities registered under Section 12(b)
of the Act: None



Securities registered under Section 12(g)
of the Act:



Common Stock, $0.001 par value



(Title of class)



Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  ̈    No
x



Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes  ̈    No
x



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes  ̈    No
x



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes ̈Nox



Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.     ̈

Yes  ̈    No
x



Indicate by check mark whether the registrant
a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of
"large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the
Exchange Act.



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



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

Yes  ̈    No
x



As of June 30, 2012, the last business
day of the registrant's most recently completed second fiscal quarter, the aggregate market value of the registrant's common stock
held by non-affiliates was $8,550,000, based upon the last reported sale price ($0.02) of the registrant's common stock on that
date as reported by OTCMarkets.com. For the purposes of the foregoing calculation only, all of the registrant's directors, executive
officers and persons known to the registrant to hold ten percent or greater of the registrant's outstanding common stock have been
excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not a determination for
other purposes.



The number of
shares of Common Stock, $0.001 par value, outstanding on June 14, 2013was 837,929,245 shares.













TABLE OF CONTENTS



|                                                                        | Page                                                                                                               
|----------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------
|PART I                                                                  |                                                                                                                    
|Item 1.                                                                 | Business                                                                                                           
|Item 1A.                                                                | Risk Factors                                                                                                       
|Item 1B.                                                                | Unresolved Staff Comments                                                                                          
|Item 2.                                                                 | Properties                                                                                                         
|Item 3.                                                                 | Legal Proceedings                                                                                                  
|Item 4.                                                                 | Mine Safety Disclosures                                                                                            
|                                                                        |                                                                                                                    
|PART II                                                                 |                                                                                                                    
|Item 5.                                                                 | Market for Registrant's Common Equity and
    Related Stockholder Matters and Issuer Purchases of Equity Securities
|Item 6.                                                                 | Selected Financial Data                                                                                            
|Item 7.                                                                 | Management’s Discussion and Analysis
    of Financial Condition and Results of Operations                          
|Item 7A.                                                                | Quantitative and Qualitative Disclosures About
    Market Risk                                                     
|Item 8.                                                                 | Financial Statements and Supplementary Data                                                                        
|Item 9.                                                                 | Changes in and Disagreements With Accountants
    on Accounting and Financial Disclosure                           
|Item 9A                                                                 | Control and Procedures                                                                                             
|Item 9B.                                                                | Other Information                                                                                                  
|                                                                        |                                                                                                                    
|PART III                                                                |                                                                                                                    
|Item 10.                                                                | Directors, Executive Officers and Corporate
    Governance                                                         
|Item 11.                                                                | Executive Compensation                                                                                             
|Item 12.                                                                | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters                 
|Item 13.                                                                | Certain Relationships and Related Transactions,
    and Director Independence                                      
|Item 14                                                                 | Principal Accounting Fees and Services                                                                             
|                                                                        |                                                                                                                    
|PART IV                                                                 |                                                                                                                    
|Item 15.                                                                | Exhibits, Financial Statement Schedules                                                                            
|                                                                        |                                                                                                                    
|Signatures                                                              |                                                                                                                    
|                                                                        |                                                                                                                    
|Index to Financial Statements                                           |                                                                                                                    
|Reports of Independent Registered
    Public Accounting Firms           |                                                                                                                    
|Financial Statements for the Years
    Ended December 31, 2012 and 2011 | F-1                                                                                                                



2







USE OF FORWARD LOOKING STATEMENTS IN
THIS REPORT



This Annual
Report contains forward-looking statementswithin the meaning
of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include, but are not limited to, predictions regarding:



| | • |  | our business plan;
| | - |  | ------------------



| | • |  | the commercial viability of our
    products;
| | - |  | ---------------------------------------------



| | • |  | the effects of competitive factors
    on our products ;
| | - |  | --------------------------------------------------------



| | • |  | expenses we will incur in operating
    our business and revenues we will earn in operating our business;
| | - |  | ---------------------------------------------------------------------------------------------------------



| | • |  | our liquidity and sufficiency
    of existing cash;
| | - |  | ---------------------------------------------------



| | • |  | the success of our financing plans;
    and
| | - |  | -------------------------------------------



| | • |  | the outcome of existing, pending
    or threatened litigation.
| | - |  | --------------------------------------------------------------



You can identify these and other forward-looking
statements by the use of words such as “may”, “will”, “expects”, “anticipates”,
“believes”, “estimates”, “continues”, or the negative of such terms, or other comparable terminology.
Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements.



Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under
the heading “Risk Factors”. All forward-looking statements included in this document are based on information available
to us on the date hereof. We assume no obligation to update any forward-looking statements.



The information contained in this Annual
Report is as of December 31, 2012, unless expressly stated otherwise.



As used in
this report, the term Company,we, us and ourrefers to All American Pet Company, Inc., a Nevada corporation, and its consolidated subsidiaries.



3







PART I



ITEM 1.

BUSINESS



Overview





All American Pet Company, Inc. and its
consolidated subsidiaries (“AAPT”) develops and markets innovative first-to-market pet wellness products including
super-premium dog food bars, dog food snacks and antibacterial paw wipes.





The executive offices are located at 1100
Glendon Avenue, 17th Floor, Los Angeles, California 90024. The office telephone number is (310) 689-7355.



The Company’s online sites are www.allamericanpetcompany.com,
www.nutrabar.com, www.pawtizer.com,
www.facebook.com/nutrabar, www.facebook.com/pawtizer,
www.vetresearchlibrary.com, http://issuu.com/nutrabarand
http://bewelllivelong.wordpress.com



The information on our websites are
not, and shall not be deemed to be, a part of this report or incorporated by reference into this or any other filing we make with
the Securities and Exchange Commission (the “SEC”)



History of the Company and its Current
Status



All American Pet Company, Inc. was initially
organized under the laws of the State of New York (“All American Pet Company, Inc. NY”) in February 2003. In January
2006, All American Pet Company, Inc. NY merged into All American Pet Company, Inc. a Maryland Corporation (“All American
Pet Company, Inc. MD”). In June 2012, All American Pet Company, Inc. MD merged into a Nevada Corporation, (“All American
Pet Company, Inc.”).



The Company has formed a number of wholly
owned subsidiaries to provide for accountability of each of its operations. All American PetCo, Inc. was formed in January 2008
to provide corporate infrastructure and management services. All American Pet Brands, Inc. was formed in April 2009 to be the
Company’s manufacturing and warehousing operation. In September 2009, the Company signed a license and distribution agreement
with AAP Sales and Distribution, Inc. a third party company that obtained the rights to sell certain of the Company’s products
on a non-exclusive basis. AAP Sales and Distribution, Inc.’s operations have been consolidated with All American Pet Company,
Inc. based on accounting guidelines for Variable Interest Entities.



In 2010 and 2011, AAPT produced, marketed,
and beta tested two super-premium dog foods under the brand names Grrr-nola®Natural Dog Food and Chompions®.
We believe that bothGrrr-nola®Natural Dog Food and Chompions® were the first dog food
products that were formulated for canine heart health and endorsed by a veterinary cardiac surgeon.



4







In 2012, after the beta testing, the Company
completed market research, proprietary scientific formulation and testing for an all-natural super premium bar category called
NutraBarTM - original, low fat and senior formulas. It also produced proprietary formulations for two additional bars –
Chomp BarTM and Mutt BarTM. It has successfully launched its portable, convenient and functional NutraBarTM line
of all natural true food super premium bars to both online and traditional brick and mortar retailers. Each gluten-free 4 ounce
bar has a kCal equivalent of 8 ounces of super-premium dry dog food. The bars have been both manufactured and packaged by the
Company since the fourth quarter 2012 and related sales commenced in 2013.



The Company has shown and announced to
the U.S. market the first line of all-natural super premium dog treats called CHEWIESTM, which comes in three flavors, and
is preparing to market its CHEWIESTM line of flavored all-natural super-premium 27% protein dog treats.



During 2012, the Company also launched
its PAWtizerTM line of wet wipes and spray, the pet care industry’s first alcohol-free, anti-bacterial dog cleaner.





The Company has never operated at a profit
and is dependent upon additional financing to remain a going concern. Throughout 2012, the Company obtained equity capital in the
amount of approximately $3,000,000 and continues to seek additional equity capital to sustain operations. The Company remains under
significant financial strain, primarily because of its limited operating funds and a significant amount of past due debts. The
limited amount of operating capital may preclude the Company’s ability to execute its manufacturing, marketing, and distribution
objectives or to continue operations. As a result, the reports of the independent registered public accounting firms on the Company’s
2012 and 2011 consolidated financial statements include explanatory paragraphs expressing substantial doubt regarding the Company’s
ability to continue as a going concern.



Products



The Company has developed a number of
innovative pet wellness products. The Company is also in the process of developing new products, variations of existing products
and other items that will complement and enhance the Company’s array of product offerings. The Company requires significant
additional financing to market, manufacture and sell its existing products and to develop new products. Key components of the
Company’s product offerings are described below:



NutraBarTM

The
Company has developed (and launched in 2013) the pet industry’s first dog food product packaged as a nutritional food bar.
With three product lines targeting the super-premium dog food and dog treat segments,the Company’s all-natural bars
are the equivalent of 8 ounces of dry kibble in a 4 ounce bar. These bars offer a high protein meal or snack without the inconvenience
of bags and bowls. AAPT’s true food bars are formulated to contain a blend of natural ingredients
and provide essential nutrients optimized to promote a dog’s nutrition, health, and vitality.



5







CHOMPBarTM

The line contains 27% protein
quad segmented 4 ounce bars with digestive fiber enhancements in addition to functional vitamin and mineral supplementation. It
comes in original, low fat and senior formulas.



MUTTBarTM

MuttTMBar products contain
25% protein and are supplemented with omega 3 fatty acid to promote healthy skin and coat. They are fortified with vitamin and
amino acids. The bars will also be a quad-segmented 4 ounce wrapped bar available singly, as well as in full-color display cartons
of a dozen. They also come in original, low fat, and senior formulas.



CHEWIESTM

The Company’s line of
27% high protein dog snacks will be made with the same nutritive ingredients as the food bars with additional flavorings added.
CHEWIESTM will be packaged in 8 ounce and 16 ounce re-sealable pouches containing approximately 32 and 64 bite sized pieces.



PAWtizerTM

The Company developed PAWtizerTM
for the purpose of protecting the 53 million American families that are homes to 78 million dogs from infectious human germs such
as MRSA, E. coli, Salmonella and other bacteria that are innocently picked up by dogs and transferred to humans. PAWtizerTM
is the pet care industry’s first alcohol-free anti-bacterial dog cleaner. With PAWtizerTM, the Company is delivering
a product that research has shown to be more useful and effective than alcohol. PAWtizerTM is available in canisters of 100
and 45 count, chemically treated wet wipes that have been shown to kill 99.9% of the germs resident on a typical dog paw. PAWtizer|TM
also comes in a convenient 8 ounce spray with Bitrex® added. Bitrex® is a “bittering” agent that will prevent
dogs from licking their paws and thus extending the reach of the antibacterial effects of PAWtizerTM.



The principal active ingredient
in PAWtizerTM products is 0.13% Benzalkonium chloride, a germ reducing agent that has been widely accepted for use as a topical
antiseptic for human cuts and scrapes and “leave on skin” cosmetics.



The Pet Industry



Indulgent pet parents will drive up demand for premium pet
food and services



The Pet Food industry is growing
rapidly with combined worldwide annual revenue of about $53 billion per year according to industry data provided by Tully and
Holland in 2012. According to the 2011-2012 APPA’s (American Pet Products Manufacturers Association) National Pet Owners
Survey, 53million American families are homes to 78.5 million dogs.



6







The U.S. pet food and snack category is
a $19.8 billion dollar a year market, with $12.6 billion spent exclusively on dog foods and treats according to the Euromonitor
International 2011-2012 annual report. Euromonitor International breaks the market down as follows:



U.S. Pet Food
Sales($ Billions)










|               |  | 2003 |     |  | 2010 |   |     | 2011
    - 2012 | 
|-------------- |  | ---- | --- |  | ---- | - | --- | --------------- | 
|Dog Food – Dry |  | $    | 5.3 |  |      | $ | 7.7 |                 | 
|Dog Treats     |  | $    | 1.4 |  |      | $ | 2.2 |                 | 

Source: Euromonitor
International



Tully & Holland’s made higher
estimates of the U.S. market size for dog foods and treats with $13.5 billion in 2012 and $12.7 billion in 2011.



The pet industry in the United States
and many other countries is experiencing solid growth as Americans own more pets than ever before. Growth in the sector is derived
both from increasing pet ownership, as well as from increased spending per pet. Pet pampering is becoming the norm, as pet owner
spending has moved far beyond simple food and grooming expenses to include innovative and specialized premium products. Accordingly,
people increasingly view their pets as part of the family and are willing to spend even during difficult economic times.



Approximately 53% of all households own
more than one pet and dogs can be found in at least six out of ten homes. Other pet industry analysts are more optimistic. An
overall rise in the number of pets in the U.S. and increased spending per pet are the main factors that will contribute to the
pet’s industry expected growth in the years ahead. Even with the overall economic recovery taking longer than expected,
annual revenue growth in pet products and services is anticipated to be approximately 5.7% through 2016 according to the U.S.
Pet Market Outlook 2011/12. As the recovery takes hold, U.S. Pet Market Outlook 2011/12 also anticipates that household disposable
income will rise even faster, and spending on pets will pick up even more.



7







The U.S. is the largest marketplace for dog treats.



According to the IBIS World "Animal
Food Production in the US: Market Research Report", steady growth in pet ownership, spikes in feed prices and increasing
demand from farm supplies wholesalers have contributed to industry revenue gains at an annualized rate of 4.2 percent since 2007.
"The industry's future prospects are modest, with slow but sustained growth anticipated through the next five years. The
forecast predicted a moderate increase in disposable incomes and, subsequently, pet ownership, which will likely drive demand
for pet foods, a segment typified by high profit margins and brand-loyal consumers,” according to IBIS World industry analyst,
Josh McBee. The recession did slow down the rate of growth of purchases, but revenue expansion remained strongly positive throughout
the worst of the crisis. The stats reveal a CAGR (compound annual growth rate) of 6.7% from 1994 through 2010, including 4.8%
in 2010.



The Pet
Food Production industryprovides sustenance for pets in the U.S. and around the world. Americans
stood by their pets during the Great Recession in the 1930's, with canine ownership growing despite falling personal disposable
income. As such, IBIS World industry analyst Josh McBee expects “that through 2017, demand for pet foods is once again anticipated
to rise faster than GDP growth. A projected trend toward greater brand optimization will help manufacturers retain and expand
market share during the period. Pet food producers’ claims are increasingly mirroring those of human food makers, touting
healthy enrichments produced without preservatives or artificial flavors.” Furthermore, natural and functional pet foods
have also increased in popularity. These products attract the highest margins, and demand remains relatively resilient since they
target the premium segment of the buying market.



Demand for products that address deficiencies
in commercial dog food is on the rise as the number of serious medical conditions in dogs grows.  These concerns have
resulted in “natural” pet food becoming the double digit growth sector in the pet food industry.  Statistics
show that more than 30 million dogs will have cardiac disease by the time they reach the age of 7.



According to Packaged Facts, the fastest
growing segment of the companion animal market, is pet healthcare, with annual revenues of $34 billion (bigger than the toy, pasta,
and baby food industries combined), and growing at about 15% per year.  People who are becoming educated regarding pet healthcare
are driving the domestic pet market, which includes 78.5 million dogs in the U.S.  Driving this growth are people that
tend to be at the top of their economic cycle and have a higher propensity to purchase healthy food products for their pets.  AAPT’s
super premium dog food bars and treats are specially formulated by a leading canine nutritionist and can be part of a diet that
decreases the impact of cardiac conditions, musculoskeletal stress, obesity, and Type I diabetes.



Human Food Bars

The Human Food Bar business was approximately
$6.3 billion in 2012 according to Convenience Store News. The human food bar market demographics encompasses all age, sex and
income brackets. Of the 78.5 million dog population in the U.S., management estimates the domestic market potential for dog food
bars at $300-$400 million.



8







CHEWIESTM Treats

The U.S. is the largest market for dog
treats. What sets CHEWIESTM apart from the competitors in the market space is its significant percentage of all natural super-premium
chicken meal protein; 27%. Additionally, CHEWIESTM is a formula extension of the BARS, which assures consumers of a product
their dogs will prefer while reducing the costs of manufacturing owing to utilization of common ingredients and manufacturing
equipment. CHEWIESTM is all natural, but incorporates air borne aromatics to create a variety of unique flavors without impacting
its “all natural” credential. CHEWIESTM will be available in peanut, cheese and bacon flavors packaged in vapor
blocking re-sealable 8 ounce and 16 ounce bags.



Hand Sanitizer

Management is not aware of market or industry
data for Pet Sanitizers. The Company believes that the consumer demographics of anti-bacterial dog paw wipes will be very similar
to the primary consumers of hand sanitizers and baby wipes. These markets are dominated by women aged 21-34, new mothers and other
females aged 50 and up. Many sanitary wipe consumers live within households with annual household incomes in excess of $70,000.
Management believes that the demographics for the Pet Sanitizer business will be very similar to the hand sanitizer market. Approximately
$152 and $146 million was spent on hand sanitizers in 2012 and 2011, respectively according to Drug Store Management. By extrapolating
this data to 62% of U.S. homes that have dogs, management believes that the market potential for Pet Sanitizers is approximately
$40-$50 million.



Marketing



The marketing of AAPT’s brands began
in 2011 with the introduction of PAWtizerTM, followed by the introduction of the three NutraBarTM lines in late 2012.  The
Company continues to build awareness for their brands, mostly through electronic media and retail promotions.



The Company’s strategy is to build
a national distribution footprint that will benefit from regional and national marketing campaigns. The Company has approached
a broad range of mass merchants, pet centers, supermarket chains, drug store chains, and convenience store chains regarding selling
AAPT products in their stores.  AAPT is currently an approved vendor to retail outlets with over 60,000 locations nationwide.  In
addition to online sales through the nation’s largest online retailer, AAPT has developed a network of food brokers who
have strong relationships with national retail chains representing over 125,000 stores that carry pet food, pet snacks and other
pet products.  The Company has also brought in outside merchandising experts to market and increase public awareness
of the Company’s products.



AAPT’s sales efforts are focused
on setting sales and delivery dates for new product lines. We commenced online sales of PAWtizerTM in May of 2012 and retail
sales of this product commenced in August 2012. We also commenced online sales and retail sales of NutraBarTM 2013. The Company
is anticipating additional purchases to result from its vendor status with these retailers in 2013 and beyond. The Company will
organically expand its sales from its core retailers to streamline introduction of other All American Pet Company products.



9







Educating the public regarding AAPT products
and the benefits that dogs will receive from them is an important aspect of AAPT’s business.  The Company has
employed advanced media and promotional techniques to educate consumers about the health benefits of their revolutionary pet wellness
and dog food products.  It is our belief that consumer education will lead to increased sales of our products.  The
current media-driven tools AAPT is using include direct marketing and data gathering programs, Internet marketing, strategic media,
promotional alliances, traditional and non-traditional advertising campaigns, and national, local, and print news interviews.  The
Company also intends to use loyalty mass mailers; “end-cap” displays and related sales promotions.



The Company intends to build a brand franchise
combining Bars, Treats and anti- bacterial wipes with products designed for intellectual (more informed) purchase choices as opposed
to emotional/impulse or novelty purchases, while focusing more on mixed breeds and offering products to both the pet owner and
the pet. In order to reach the most convertible population of potential consumers at the lowest possible cost, the Company intends
to initially use email, direct mail, twitter, video campaigns and other low cost/high impact techniques supported by social media.



The marketing of PAWtizerTM and NutraBarTMis a dual pronged approach consisting of email, Twitter, video campaign and other low cost high impact techniques directed
at highly targeted lists of potential consumers within expected consumer demographics with simultaneous programs directed at Brand
Influencers/Ambassadors.



Manufacturing



The Company
is dependent upon one non-affiliated prime contract manufacturer with three non-affiliated component manufacturers to produce
its PAWtizerTM product. The Company has one non-affiliated dry dog food manufacturer and one non-affiliated manufacturer
of its NutraBarTM product line. AAPT purchases approximately 90% of the materials necessary for the production of their products
from these third party sources.  The other 10% of the materials necessary for production comes from various packaging
manufacturers, shipping companies, and other vendors of supplies.  AAPT does not maintain supply agreements with these
parties, but instead purchases products through the use of purchase orders in the ordinary course of business.  AAPT
is currently manufacturing NutraBarTM with a “human food grade” forming machine. The Company has acquired a substantial
amount of the equipment necessary to become its own manufacturer at its leased facility in Shawnee, Kansas and management expects
the manufacturing equipment to be fully operational by the 3rd quarter of 2013, subject to the availability of sufficient
financing. The Company has also obtained the packaging and wrapping equipment necessary to wrap, carton, and case pack the NutraBarTM
andCHEWIESTM lines for retail shipment and distribution. Management believes that there
is adequate space and resources in the Shawnee, Kansas facility to execute all of these manufacturing objectives.



10







Competition



The pet food business is highly competitive.  Virtually
all of the manufacturers, distributors, and marketers of pet food have substantially greater management, financial, brand recognition,
research and development, marketing, and manufacturing resources than AAPT at the moment.  Competitors in the super-premium
dog food market include, among others: Colgate-Palmolive Co., whose major brand is Hills’ Science Diet; Proctor and Gamble,
whose major dog food brands are IAM’s and Eukanuba; and Nestle Corporation, whose major dog food brand is Purina.





There are several dog grooming aids and
dog cleaners available in the marketplace. To the Company's knowledge, none of these products are alcohol free and anti-bacterial.
Accordingly, there are several somewhat similar products to PAWtizerTM, but in the view of the Company none of these products
can be considered directly competitive in function and performance to the PAWtizerTM line of dog cleaners.





Presently, we believe AAPT is the only
manufacturer of true food bars for dogs meeting the Association of American Feed Control Officials (AAFCO) standards of nutrition
to be called a “food.”



Regulation



We are subject to a broad range of federal,
state and local laws and regulations intended to protect public health, natural resources and the environment. Our operations
are subject to regulation by the Occupational Safety and Health Administration (“OSHA”), the Food and Drug Administration
(“FDA”), the Department of Agriculture (“DOA”) and various state and local authorities regarding the processing,
packaging, storage, distribution, advertising and labeling of our products, including food safety standards. Due to the widely
publicized pet food recalls in the last few years, both our Company and our dog food suppliers are doing more quality assurance
testing for salmonella, e-coli, and other potential contaminants. A task force has been established to assert more stringent “country
of origin” labeling. We will be working with our suppliers and the FDA in solving this industry wide issue. In addition,
we will require our suppliers to test all flour samples for salmonella and E.coli and with the new test curve set up to handle
contaminants. AAPT will also be researching amino acid profiling of new suppliers to validate the legitimacy of protein sources.



Employees





As of December 31, 2012, the Company
had 16 employees. Our employees are not subject to collective bargaining arrangements.



11







ITEM 1A.                            RISK
FACTORS



An investment in our securities involves
a high degree of risk. Before making a decision to purchase our securities, you should carefully consider all of the risks described
in this annual report. The risks and uncertainties described below are not the only ones that we face. Additional risks and uncertainties
not presently known to us or that we currently deem immaterial may also affect our business and results of operations. If any
of these risks actually occur, our business, financial condition or results of operations could be seriously harmed. In that event,
the market price for our common stock could decline and you may lose all or part of your investment.



The Company faces a number of significant
risks associated with its current plan of operations. These include the following:



Our business is difficult to evaluate
because we have a limited operating history.



The Company was formed in February 2003,
and has incurred losses in each period since commencing operations. From the time of our formation until the end of 2004, we formulated
and tested our products. We did not begin to sell our products until the beginning of 2005 and were forced to stop manufacturing
and selling our products in 2007 due to a lack of funding.  In 2011 and 2012, we developed new products, which to date,
have generated limited revenues and the development of our business plan will require substantial capital expenditures. Our business
could be subject to any or all of the problems, expenses, delays and risks inherent in the establishment of a new business enterprise,
including, but not limited to limited capital resources, possible delays in product development, possible cost overruns due to
price and cost increases in raw product and manufacturing processes, uncertain market acceptance, and the inability to respond
effectively to competitive developments and to attract, retain and motivate qualified employees. Therefore, there can be no assurance
that our business or products will be successful, that we will be able to achieve or maintain a profitable operation, or that
we will not encounter unforeseen difficulties that may deplete our capital resources more rapidly than anticipated. There can
be no assurance that we will achieve or sustain profitability or positive cash flows from our operating activities.



We have never generated any significant
revenues, have a history of losses, and cannot assure you that we will ever become or remain profitable.





We have not yet generated any significant
revenue from operations and, accordingly, we have incurred net losses every year since our inception. To date, we have dedicated
most of our financial resources to general and administrative expenses, and sales and marketing activities. We have funded all
of our activities through sales of our securities.  We anticipate net losses and negative cash flow to continue for the
foreseeable future until such time as revenue is generated in sufficient amounts to offset operating costs.  Due to limited
financial resources, we have limited our sales and marketing efforts during the past year. Furthermore, we have a significant working
capital deficit as of December 31, 2012. Consequently, we will need to generate significant additional cash from financing activities
to fund our operations. This has put a proportionate corresponding demand on capital. Our ability to achieve profitability is dependent
upon our sales and marketing efforts, and our ability to manufacture and sell our products. There can be no assurance that we will
ever generate revenues or that any revenues that may be generated will be sufficient for us to become profitable or thereafter
maintain profitability. We may also face unforeseen problems, difficulties, expenses or delays in implementing our business plan.



12







We have a significant amount of
past due debts.







As of December 31, 2012, we have a working
capital deficit of $4,456,477. Furthermore, given our poor financial position and lack of liquidity, we have not fulfilled the
terms of numerous debt settlement agreements that we have previously made and we have not repaid amounts we have borrowed under
past note agreements. In addition, the Company is delinquent in the filing and payment of Federal and state payroll taxes. Significant
management time and effort is required to manage past due debts and prioritizing cash payments made by the Company. Such obligations
make it difficult for the Company to raise equity or debt funds, finance any capital expenditures, obtain terms for normal business
operating expenses and, generally, to transact business.



We have limited
commercial experience in marketing or selling any of our products, and unless we develop these capabilities, we may not be successful.



Even if we are able to develop and manufacture
our products on a large scale, we have limited experience in operating our business in the volumes that will be necessary for
us to achieve commercial sales and in marketing or selling our products to potential customers. We cannot assure you that we will
be able to manufacture and deliver our products on a timely basis, in sufficient quantities, or on commercially reasonable terms.



We have been the subject of a going
concern opinion from our independent registered public accounting firm, raising a substantial doubt about our ability to continue
as a going concern.



Our independent registered public accounting
firm included an explanatory paragraph in its audit report in connection with our 2012 financial statements stating that because
we have incurred a net loss of  $3,006,767 and a negative cash flow from operations of  $3,022,426 for the
year ended December 31, 2012 and had a working capital deficiency of  $4,456,477 and a stockholders' deficiency of  $4,571,339 at December 31, 2012, there is substantial doubt about our ability to continue as a going concern.



Our continuing as a going concern is dependent
on our ability to raise additional funds through private placements of our common stock or the issuance of debt securities sufficient
to pursue our business plan to meet our current obligations and to cover operating expenses during 2013 and into 2014. Without
immediate capital infusion in the near future, and without a significantly substantial infusion of capital within a short time
thereafter, we may be forced to limit our operations severely, and may not be able to survive.  There is no assurance
that we will be able to secure additional funding in the future, and in the event we are unable to raise additional capital in
the near future, it is probable that any investment in the Company will be lost.



13







We have had negative cash flows from operations
and our business operations may fail if our actual cash requirements exceed our estimates, and we are not able to obtain further
financing.



We have had negative cash flows from operations,
and as of December 31, 2012, we have incurred significant expenses, and have incurred a significant amount of debt, in product
development and administration in order to ready our products for market. Our business plan calls for additional significant expenses
necessary to bring our products to market. We do not have sufficient funds to satisfy our near-term cash requirements.



We need significant additional funds
to maintain and develop our business.



We have a significant working capital
deficit. Our current capital resources are insufficient to fund operations at the present time, and we will require substantial
additional capital in order to sustain our operations, fund sales and marketing activities, pay for the manufacture of our products,
and implement our business plan. Our ability to continue as a going concern is dependent on our ability to raise capital.



Although management is in discussions
to arrange for one or more such financings, we cannot assure you that we will successfully negotiate or obtain such additional
financing, or that we will obtain financing on acceptable or favorable terms, if at all. There are no commitments in place for
such financings at this time. If we cannot obtain needed capital, when and as we need it, our sales and marketing plans, ability
to manufacture products for sale, business, prospects, results of operations and financial condition and our ability to reduce
losses and generate profits are likely to be materially and adversely affected.



We expect that any commitments for additional
financings will be in the form of “best efforts” financings. Our ability to obtain additional capital depends on market
conditions, the economy and other factors, many of which are outside our control. If we cannot obtain needed capital, our research
and development, and marketing plans, business and financial condition and our sales and marketing plans, ability to manufacture
products for sale, and ability to reduce losses and generate profits are likely to be materially and adversely affected.  Our
failure to secure necessary financing would likely have a material adverse effect on our business, prospects, financial condition
and results of operations.



Exposure to possible litigation
and legal liability may adversely affect our business, financial condition and results of operations.



In the past, we have been exposed to a
variety of litigation claims and there can be no assurance that we will not be subject to other litigation in the future that
may adversely affect our business, financial condition or results of operations.



14







The cost of maintaining our public
company reporting obligations is high. We expect to incur increased costs under the Sarbanes-Oxley Act of 2002.



We are obligated to maintain our periodic
public filings and public reporting requirements, on a timely basis, under the rules and regulations of the SEC. In order to meet
these obligations, we will need to continue to raise capital. If adequate funds are not available to us, we will be unable to
comply with those requirements and could cease to be qualified to have our stock traded in a public market. As a public company,
we have incurred and will incur significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act of 2002,
as well as related rules adopted by the SEC, has imposed substantial requirements on public companies, including certain corporate
governance practices and requirements relating to internal control over financial reporting. We expect these rules and regulations
to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. Effective disclosure
controls and procedures and internal controls are necessary for us to produce reliable financial reports and are important in
helping prevent financial fraud generally. If we are unable to achieve and maintain adequate disclosure controls and procedures
and internal controls, our business and operating results could be harmed. As described in Item 9A, as of December 31, 2012, we
did not maintain effective disclosure controls and procedures and we did not maintain effective internal control over financial
reporting.



Our stockholders face further potential
dilution in any new financing.



During 2012, the Company issued a significant
number of shares of its common stock. Any additional equity that we raise would dilute the interest of the current stockholders
and any persons who may become stockholders before such financing. Given the low price of our common stock, such dilution in any
financing of a significant amount could be substantial.



Our stockholders face further potential
adverse effects from the terms of preferred stock which may be issued in the future.





In order to raise capital to meet expenses,
or to engage in extraordinary transactions such as the acquisition of a business, our Board of Directors may seek to issue additional
stock, including preferred stock. Any preferred stock which we may issue may have voting rights, liquidation preferences, redemption
rights and other rights, preferences and privileges. The rights of the holders of our common stock will be subject to, and in many
respect subordinate to, the rights of the holders of any such preferred stock. Furthermore, such preferred stock may have other
rights, including economic rights, senior to our common stock that could have a material adverse effect on the value of our common
stock. Preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes,
can also have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock, thereby
delaying, deferring or preventing a change in control of the Company.





15







Our small size and limited history
negatively affect our ability to raise capital.



It is difficult for us to find any capital
sources because of our relatively small capitalization, our losses to date, our current working capital position, our lack of
sales and other factors.  It is possible that we may not be able to raise sufficient funds in the future in order to
survive and pursue our business plan.



Attempts to grow our business could
have an adverse effect on the Company.



Because of our small size, we desire to
grow rapidly in order to achieve certain economies of scale. To the extent that rapid growth does occur, it will place a significant
strain on our financial, technical, operational and administrative resources. Our planned growth will result in increased responsibility
for both existing and new management personnel. Effective growth management will depend upon our ability to integrate new personnel,
to improve our operational, management and financial systems and controls, to train, motivate and manage our employees, and to
increase our sources of raw materials, product manufacturing and packaging. If we are unable to manage growth effectively, our
business, results of operations and financial condition may be materially and adversely affected. In addition, it is possible
that no growth will occur or that growth will not produce profits for the Company.



If we cannot successfully compete
with existing pet food companies that have greater resources than we have, our business may not survive.



The pet food business is highly competitive.  Virtually
all of the manufacturers, distributors and marketers of pet food have substantially greater management, financial, research and
development, marketing and manufacturing resources than we do. Competitors in the super-premium pet food market include, among
others: Colgate-Palmolive Co. (Hills' Science Diet), Iams Co. and Nestle’s Purina brands. Brand loyalty to existing products
may prevent us from achieving certain sales objectives. Additionally, the long-standing relationships maintained by existing premium
pet food manufacturers with veterinarians and pet breeders may prevent us from obtaining professional recommendations for our
products. In addition, we compete with private label supermarket dog foods, as well as premium dog foods offered in the specialty
pet stores. Although the dominant existing premium pet food brands are not currently available in supermarkets and mass merchants,
there can be no assurance that this situation will continue. In addition, there are no barriers to prevent the entry of such brands
into the supermarket and mass merchant distribution channel, and in the event we fail to meet sales goals determined by them for
our products they could cease shelving our products in their stores or replace our products with those of our competitors.  The
entrance into the supermarket or mass merchant distribution channel of an existing or new premium pet food by any of our competitors
could have a material adverse effect on the Company. If we are not successful in competing in these markets, we may not be able
to attain our business objectives.



16







If we are unable to market our products
to compete with new or existing products developed by well-established competitors, our business will be negatively affected.



Our potential success with PawtizerTM,
MuttTM Great Food for Great Dogs and NutraBarTM brands is significantly dependent upon our ability to market, develop,
promote and deliver the brand.  As is typical with new products, demand for and market acceptance of new products is
subject to uncertainty. Achieving market acceptance for new products may require substantial marketing and other efforts, and
the expenditure of significant funds to create customer demand. There can be no assurance that our efforts will be successful.
In addition, the failure of new products to gain sufficient market acceptance could adversely affect the image of our brand name
and the demand for our products in the future.



If our products do not gain market
acceptance, it is unlikely that we will become profitable.



The market for pet food is competitive
and subject to changing consumer preferences, including sensitivities to product ingredients and nutritional claims. At this time,
our products are largely unproven in the commercial arena. Market acceptance may depend on many factors, including factors beyond
our control, including but not limited to:

· price

· aroma

· taste

· ingredients

· nutritional claims;
and

· word-of-mouth
recommendations by pet owners



Increases in raw materials, packaging,
oil and natural gas costs and volatility in the commodity markets may adversely affect our results of operations.



Our financial results depend to a large
extent on the costs of raw materials, packaging, oil and natural gas, and our ability to pass the costs of these materials onto
our customers. Historically, market prices for commodity grains and food stocks have fluctuated in response to a number of factors,
including economic conditions such as inflation, changes in U.S. government farm support programs, changes in international agricultural
trading policies, impacts of disease outbreaks on protein sources and the potential effect on supply and demand as well as weather
conditions during the growing and harvesting seasons. Fluctuations in paper, steel and oil prices, which affect our costs for
packaging materials, have resulted from changes in supply and demand, general economic conditions and other factors. In addition,
we have exposure to changes in the pricing of oil and natural gas, which affects our manufacturing, transportation and packaging
costs.



If there is any increase in the cost of
raw materials, packaging, or oil and natural gas expenses, we may be required to charge higher selling prices for our products
to avoid margin deterioration. We cannot provide any assurances regarding the timing or the extent of our ability to successfully
charge higher prices for our products, or the extent to which any price increase will affect future sales volumes.  Our
results of operations may be materially and adversely affected by this volatility.



17







Restrictions imposed in reaction
to outbreaks of "mad cow disease," "foot-and-mouth,” "bird flu" or other animal diseases could
adversely impact the cost and availability of our protein-based raw materials.



The cost of the protein-based raw materials
used in our products has been adversely impacted in the past by the publicity surrounding bovine spongiform encephalopathy, which
is also known as "mad cow disease," and which is a terminal brain disease for cattle. Cases of bovine spongiform encephalopathy
were found in Europe, among other areas, in late 2000, and in Canada and the United States in 2003. As a result of extensive global
publicity and trade restrictions imposed to provide safeguards against this disease, the cost of alternative sources of the protein-based
raw materials used in our products, such as soybeans, pork meat and bone meal, has from time to time increased significantly and
may increase again in the future if additional cases of bovine spongiform encephalopathy are found.



In 2001, an outbreak of foot-and-mouth
disease was discovered in Europe. Foot-and-mouth disease affects animals with cloven hooves, such as cattle, swine, sheep, goats
and deer. While foot-and-mouth disease is not considered a threat to humans, people who come in contact with the virus can spread
it to animals.  Any break out of foot-and-mouth disease could adversely affect the availability of our protein-based
raw materials.



In 2004, a case of highly pathogenic avian
influenza, and commonly known as the "bird flu," was detected in the United States. Highly pathogenic avian influenza
virus was identified as the H5N2 strain and, while classified as highly virulent to birds, has not been shown to affect humans,
and is not related to the highly publicized H5N1 strain of the Asian highly pathogenic avian influenza virus. The H5N1 strain
of the Asian highly pathogenic avian influenza virus first emerged in Hong Kong in 1997, re-emerged in 2003 in South Korea, and
is known to have spread to China, Vietnam, Thailand, Cambodia, Laos, Indonesia, Turkey, Romania, Russia and Greece. 71 of the
approximately 138 people who are known to have contracted the virus associated with the H5N1 strain, purportedly from exposure
to infected birds, have died.   In an effort to limit the spread of the H5N1 strain, governmental authorities have
been ordering the destruction of infected flocks of birds and imposing bans against imports of poultry from countries where the
virus is known to exist. These measures may adversely impact the price and availability of our sources of chicken meal and other
protein-based raw materials used in our products.



If bovine spongiform encephalopathy, foot-and-mouth
disease, highly pathogenic avian influenza or any other animal disease impacts the availability of the protein-based raw materials
used in our products, we may be required to locate alternative sources for protein-based raw materials. We can give no assurance
that those sources would be available to sustain our sales volumes, that these alternative sources would not be more costly or
that these alternative sources would not affect the quality and nutritional value of the All American Pet brand. If outbreaks
of bovine spongiform encephalopathy, foot-and-mouth disease, highly pathogenic avian influenza or any other animal disease or
the regulation or publicity resulting there from impacts the cost of the protein-based raw materials used in our products, or
the cost of the alternative protein-based raw materials necessary for our products as compared to our current costs, we may be
required to increase the selling price of our products to avoid margin deterioration. We can give no assurance regarding the timing
or the extent of our ability to successfully charge higher prices for our products, or the extent to which any price increase
will affect future sales volumes.



18







We are dependent on third party
manufacturers who may not provide us with the quality competitive products at reasonable prices.





We do not have the required financial and
human resources or capability to manufacture our own products.  Until we obtain these resources and capabilities, if
ever, our business model calls for the outsourcing of the manufacturing of our products. We must enter into agreements with other
companies that can assist us and provide certain capabilities, including sourcing and manufacturing, which we do not possess. We
may not be successful in entering into such alliances on favorable terms or at all. Even if we do succeed in securing such agreements,
we may not be able to maintain them. Furthermore, any delay in entering into agreements could delay the production or commercialization
of our products or reduce their competitiveness even if they reach the market. Any such delay related to such future agreements
could adversely affect our business.



We have been and will continue to be materially
dependent on a limited number of non-affiliated third parties for the manufacture and production of our products.



The Company is dependent upon one non-affiliated
prime contract manufacturer with three non-affiliated component manufacturers to produce its PAWtizerTM product. The Company
has one non-affiliated dry dog food manufacturer and one non-affiliated manufacturer of its NutraBarTM product line. We do
not maintain supply agreements with these parties, but instead purchase products through the use of purchase orders in the ordinary
course of business. We will be substantially dependent on the ability of these parties to, among other things, meet our performance
and quality specifications. Failure by these parties to comply with these and other requirements could have a material adverse
effect on the Company. Furthermore, these parties may not dedicate sufficient production capacity to meet our scheduled delivery
requirements, and they may not have sufficient production capacity to satisfy our requirements during any period of sustained
demand. Their failure to supply, or their delay in supplying us with products, could have a material adverse effect on the Company.  In
addition, the success of our products is significantly dependent on mass merchant, pet centers, drug stores, and supermarket demand
for our products, and if we fail to secure orders from mass merchant, pet centers, drug stores or supermarkets for our products
(and any subsequent decrease in such orders) would have a material adverse effect on us.



19







Furthermore, in March 2007, The Federal
Food and Drug Administration announced that it found the chemical Melamine in pet foods manufactured in the United States. Melamine,
a chemical banned in this country and used to make plastics and fertilizer in Asia was detected in wheat gluten used as an ingredient
in wet-style canned pet products. The FDA issued a recall of more than 100 brands of pet food, which amounted to more than 60
million cans of tainted pet food. Because the melamine ingested food caused acute kidney failure, the FDA confirmed about 15 pet
deaths, however the number of pet deaths related to kidney failure was believed to be in the thousands.



If we or our customers are the subject
of product liability claims, we may incur significant and unexpected costs and our business reputation could be adversely affected.



We may be exposed to product liability
claims and adverse public relations if consumption or use of our products is alleged to cause injury or illness. Because the Company
self-insures its product liability exposures, a product liability judgment against us or our agreement to settle a product liability
claim could also result in substantial and unexpected expenditures, which could potentially require us to cease operations. In
addition, even if product liability claims against us are not successful or are not fully pursued, defending these claims would
likely be costly and time-consuming, and may require management to spend time defending the claims rather than operating our business.
Product liability claims, or any other events that cause consumers to no longer associate our brand with high quality and safety
may decrease the value of our brand and lead to lower demand for our products. Product liability claims may also lead to increased
scrutiny of our operations by federal and state regulatory agencies, and could have a material adverse effect on our brands, business,
results of operations and financial condition.



We are subject to extensive governmental
regulation, and our compliance with existing or future laws and regulations, as well as the possibility of any mandatory product
recalls imposed by future regulations, could cause us to incur substantial expenditures.



We are subject to a broad range of federal,
state and local laws and regulations intended to protect public health, natural resources and the environment. Our operations
are subject to regulation by OSHA, the FDA, the DOA and various state and local authorities regarding the processing, packaging,
storage, distribution, advertising and labeling of our products, including food safety standards. Violations of or liability under
any of these laws and regulations may result in administrative, civil or criminal penalties against us, revocation or modification
of applicable permits, environmental investigations or remedial activities, voluntary or involuntary product recalls, or cease
and desist orders against operations that are not in compliance. These laws and regulations may change in the future, and we may
incur material costs in our efforts to comply with current or future laws and regulations or in any required product recalls.
These matters may have a material adverse effect on our business.



20







Negative publicity resulting from
recalls on pet foods in the United States could negatively affect the sales and marketability of our products.



In March 2007, the FDA discovered certain
contaminants in vegetable proteins imported into the United States from China.  Subsequently, the FDA began investigating
an imported rice protein concentrate that contained melamine, which may have been used as an ingredient in some pet foods.  As
a result of this investigation, a number of dog food manufacturers recalled dog foods that contained the chemical melamine, which
is banned in the United States, in dog food that contained wheat gluten. Even though our products do not use wheat gluten, any
recall of dog food products and resulting publicity or regulations may adversely affect the Company and the sales of our products.



If we experience product recalls,
we may incur significant and unexpected costs and our business reputation could be adversely affected.



We may be exposed to product recalls and
adverse public relations if our products are alleged to cause injury or illness or if we are alleged to have violated governmental
regulations. A product recall could result in substantial and unexpected expenditures, as well as sales declines, which would
negatively impact our cash flows. In addition, a product recall may require significant management attention. Product recalls
may damage the value of our brand and lead to decreased demand for our products. Product recalls may also lead to increased scrutiny
by federal, state and local regulatory agencies, and could have a material adverse effect on our brand, business, results of operations
and financial condition.



Our lack of product and business
diversity could inhibit our ability to adapt our business to industry changes and developments.



We are currently engaged in the dog food
business and other pet wellness products targeting dogs. Additionally, our efforts to date have been concentrated in high-end
products and super-premium dry dog foods. Our current business plan is focused on the development, manufacturing and sale of dog
sanitizers and nutrition treats. This lack of diverse business operations exposes us to significant risks. Our future success
may be dependent upon our success in developing and expanding our areas of concentration and upon the general economic success
of the dog food industry. In addition, decline in the market demand for our products could have a material adverse effect on our
brand, business, results of operations and financial condition.



We are highly dependent upon our
marketing efforts.



The success of our business is significantly
dependent on our ability to market our products to supermarkets, grocery stores, mass merchants, drug stores, and specialty pet
stores, as well as the general public. We will be required to devote substantial management and financial resources to these marketing
and advertising efforts, and it is possible we will not be successful in these efforts.



21







Nondisclosure agreements with employees
and others may not adequately prevent disclosure of trade secrets and other proprietary information.



We rely in part on nondisclosure agreements
with our employees, consultants, agents and others to whom we disclose our proprietary information. These agreements may not effectively
prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure
of confidential information. In addition, others may independently discover trade secrets and proprietary information, and in
such cases we could not assert any trade secret rights against such parties. Costly and time-consuming litigation could be necessary
to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could
adversely affect our competitive business position. Since we rely on trade secrets and nondisclosure agreements to protect some
of our intellectual property, there is a risk that third parties may obtain and improperly utilize our proprietary information
to our competitive disadvantage. We may not be able to detect unauthorized use or take appropriate and timely steps to enforce
our intellectual property rights.



If we lose our key personnel or
are unable to attract and retain additional personnel, we may be unable to achieve profitability.



Our future success is substantially dependent
on the efforts of our senior management, particularly Barry Schwartz, our Chief Executive Officer, and a director of the Company;
and Lisa Bershan, our President and a director of the Company. The loss of the services of either Mr. Schwartz or Ms. Bershan,
who are husband and wife and are the only two Company directors, may significantly delay or prevent the achievement of product
development and other business objectives. If we lose their services, or do not successfully recruit key personnel, the growth
of our business could be substantially impaired. At present, we do not maintain key person insurance for any of our senior management.



The Company’s Board of Directors
does not adequately provide management oversight and accountability.



The Company’s Board of Directors
is presently comprised of only two individuals and they are also the Company’s Chief Executive Officer and President. Furthermore,
these two individuals are husband and wife. As a result of this corporate structure, the Board of Directors is not independent
of management, and therefore, has no ability to oversee management’s financial and operational performance and hold management
accountable for the achievement of the Company’s goals and objectives.



We may not be able to attract or
retain qualified senior personnel.



We believe we are currently able to manage
our current business with our existing management team. However, as we expand the scope of our operations, we will need to obtain
the full-time services of additional senior management and other personnel. Competition for highly skilled personnel is intense,
and there can be no assurance that we will be able to attract or retain qualified senior personnel. Our failure to do so could
have an adverse effect on our ability to implement our business plan.



22







Our common stock is thinly traded
and largely illiquid.



Our stock is currently quoted on the Over
the Counter (“Pink Sheets”). Being quoted on the Pink Sheets has made it more difficult to buy or sell our stock and
from time to time has led to a significant decline in the frequency of trades and trading volume. Continued trading on the Pink
Sheets will also likely adversely affect the Company’s ability to obtain financing in the future due to the decreased liquidity
of the Company’s shares and other restrictions that certain investors have for investing in Pink Sheets  traded
securities. While the Company intends to seek listing on the NASDAQ Stock Market (“NASDAQ”) or another stock exchange,
when the Company is eligible, there can be no assurance when or if the Company’s common stock will be listed on NASDAQ or
another stock exchange.



The market price of our stock is
subject to volatility.



Because our stock is thinly traded, its
price can change dramatically over short periods, even in a single day. An investment in our stock is subject to such volatility
and, consequently, is subject to significant risk. The market price of our common stock could fluctuate widely in response to
many factors, including:



| | · | announcements
                                                                                     of product innovations by us or our competitors;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | · | announcements
                                                                                     of new products or new customers by us or
                                                                                     our competitors;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | actual or
                                                                                     anticipated variations in our operating results
                                                                                     due to the level of development expenses
                                                                                     and other factors;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | conditions
                                                                                     and trends in our industry;
| | - | ---------------------------------------------------------------------------------------------------------------------------



| | · | general economic,
                                                                                     political and market conditions and other
                                                                                     factors; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the occurrence
                                                                                     of any of the risks described in this report.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



23







You may have difficulty selling
our shares because they are deemed “penny stocks”.



Because our common stock is not quoted
on the NASDAQ Global Market or NASDAQ Capital Market or listed on a national securities exchange, if the trading price of our
common stock remains below $5.00 per share, trading in our common stock will be subject to the requirements of certain rules promulgated
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which require additional disclosure by
broker-dealers in connection with any trades involving a stock defined as a penny stock (generally, any non-NASDAQ equity security
that has a market price of less than $5.00 per share, subject to certain exceptions). Such rules require the delivery, prior to
any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith and
impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers
and accredited investors (generally defined as an investor with a net worth in excess of $1,000,000 or annual income exceeding
$200,000 individually or $300,000 together with a spouse). For these types of transactions, the broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to
the sale. The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotations
for the penny stock and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s
presumed control over the market. Such information must be provided to the customer orally or in writing before or with the written
confirmation of trade sent to the customer. Monthly statements must be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks. The additional burdens imposed upon broker-dealers
by such requirements could discourage broker-dealers from effecting transactions in our common stock, which could severely limit
the market liquidity of the common stock and the ability of holders of the common stock to sell their shares.



We have not and do not anticipate
paying dividends in the foreseeable future.



We have not paid any cash dividends to
date with respect to our common stock. We do not anticipate paying dividends on our common stock in the foreseeable future since
we will use all of our earnings, if any, to finance expansion of our operations. However, we are authorized to issue preferred
stock and may in the future pay dividends on the preferred stock that may be issued.



ITEM 1B. UNRESOLVED STAFF COMMENTS



None.



ITEM 2. PROPERTIES



Our principal executive offices are presently
located at 1100 Glendon Ave, 17th Floor, Los Angeles, California 90024. The Company leases 1,000 square feet of office
space for $5,326 per month for its corporate offices on a month-to-month lease. The Company also subleases 19,000 square feet
of a 33,000 square foot warehouse located at 8310 Hedge Lane Terrace, Shawnee, Kansas.



The Company
utilizes the Shawnee premises for light manufacturing, business offices and warehouse storage facilities.  The Shawnee
facility lease commenced on April 16, 2012 and runs for a 5 year minimum term with monthly rent of $8,371, taxes of $2,336, insurance
of $218, and $110 in common area maintenance fees, plus utilities, as incurred. The Company also holds anoption to purchase
the entire property at the expiration of the third year of the lease at a price based upon the most current assessment of the
County Appraiser’s office and on terms acceptable to the Lessor and us.



24







ITEM 3. LEGAL PROCEEDINGS



The Company is involved in various litigation involving vendors,
former employees, and a promissory noteholder.



Vendors



As of December 31, 2011, one vendor had
a settlement agreement for $20,000. During 2012, six vendors made claims or were awarded judgments against the Company for a total
of $364,473, and related payments of $2,000 were made. The balance outstanding to these vendors at December 31, 2012, was $382,473
and such amount has been accrued for in the Company’s December 31, 2012 consolidated balance sheet.





On July 23, 2012, a vendor filed an action
against the Company and certain officers as individuals for an original $150,000 judgment previously awarded in arbitration, 4.75%
interest, legal fees of $49,950, and other fees of $4,981. The action has not been heard by a court. The Company has recognized
$221,463 in its December 31, 2012 consolidated balance sheet relating to this matter.



Former Employees



As of December 31, 2011, six former employees
made claims or were awarded judgments against the Company for a total of $211,961. During 2012, one former employee entered into
a settlement agreement for $50,000, and there were no payments. The balance outstanding at December 31, 2012 was $268,245, and
includes accrued interest. Such amount has been accrued for in the Company’s December 31, 2012 consolidated balance sheet.



On April 6, 2010, the Company settled
litigation with one of the six former employees. Terms of the settlement required the former employee to place 400,000 shares
of Company stock valued at $52,000 in an escrow account in exchange for an initial payment of $8,000 and 27 monthly payments of
$1,571. The Company will receive the shares of Common stock after all of the payments have been made. The Company made no payments
in 2012 and $3,342 in 2011. The outstanding balance at December 31, 2012 and 2011 was $31,432.



On February 3, 2011, through mediation,
the Company settled litigation with one of the former six former employees. Terms of the settlement required the former employee
to place 750,000 shares of Company stock valued at $90,000 in an escrow account in exchange for 14 monthly payments of $6,576.
The Company will receive the shares of Common stock after all of the payments have been made. The Company made no payments in
2012 and $2,069 in 2011. The outstanding balance at December 31, 2012 and 2011 was $90,000.





On January 18, 2013, All American Pet Company,
 Inc. (the “Company”) filed an action entitled All American Pet Company, Inc. vs. Eric Grushkin et al, in the
Superior Court of the State of California, County of Los Angeles, West District against defendant Eric Grushkin (Case Number: SC119776).
 As previously announced, on January 11, 2013,  the Company was made aware that a former employee sent communications
that contained intentionally misleading and harmful disclosures as well as confidential information regarding the Company to a
selected group of shareholders. These communications included allegations that the Company’s chief executive officer and
president engaged in acts of malfeasance, misfeasance and negligence in the management and conduct of the Company business. The
Company believes that this employee made multiple unauthorized disclosures of confidential information and misinformation to these
shareholders on January 10, 2013 and thereafter. The complaint seeks damages and injunctive relief for:



| | 1. | breach of contract
| | -- | ------------------



| | 2. | misappropriation of trade secrets
| | -- | ---------------------------------



| | 3. | intentional interference with prospective economic advantage
| | -- | ------------------------------------------------------------



| | 4. | breach of fiduciary duty
| | -- | ------------------------



| | 5. | violation of computer fraud and abuse act, and
| | -- | ----------------------------------------------



| | 6. | conversion
| | -- | ----------



Motions made by the defendant to remove
to U.S. District Court and then to Dismiss have been denied. Other motions by the defendant have also been denied. This matter
is currently pending in California State Court.



25







Promissory Noteholder



On August 9, 2012, the Company settled
litigation with the holder of a promissory note for $300,000. Interest accrues at 8%. Terms of the settlement require quarterly
payments of $30,000 beginning October 1, 2012. Total payments during 2012 were $80,000. The outstanding balance as of December
31, 2012, was $227,281 inclusive of accrued interest.



In the event of default, the noteholder
can enter a stipulated judgment against the Company and certain officers as individuals in the amount of $1,197,190. As of the
date of this filing, the Company has not made the required January 1 or April 1, 2013 payments and the noteholder has not filed
the stipulated judgment against the Company.



From time to time, we are involved in
other litigation arising in the normal course of business. Management believes that resolution of these other matters will not
result in any payment that, in the aggregate, would be material to our financial position or results of operations.



ITEM 4. MINE SAFETY DISCLOSURES



Not applicable.



ITEM 5. MARKET FOR COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES



Market Information





The table below represents the quarterly
high and low bid prices for the Company’s common stock, quoted under the symbol “AAPT.PK”, for the last two fiscal
years as reported by OTCMarkets.com.



|               |  | 2011 |       |  | 2012 |  
|-------------- |  | ---- | ----- |  | ---- | -
|               |  | High |       |  | Low  |  
|First Quarter  |  | $    | 0.045 |  |      | $
|Second Quarter |  | $    | 0.030 |  |      | $
|Third Quarter  |  | $    | 0.020 |  |      | $
|Fourth Quarter |  | $    | 0.005 |  |      | $



As of June 14, 2013, there were approximately
269 holders of record of our common stock.



Dividends



The Company has never declared or paid
a cash dividend to stockholders. The board of directors presently intends to retain any earnings, which may be generated in the
future to finance Company operations.



26







Capital Stock





All American Pet Company, Inc. was initially
organized under the laws of the State of New York (“All American Pet Company, Inc. NY”) in February 2003. In January
2006, All American Pet Company, Inc. NY merged into All American Pet Company, Inc. a Maryland Corporation (“All American
Pet Company, Inc. MD”). All American Pet Company, Inc. MD was formed under Maryland law on January
4, 2006 with 50,000,000 authorized shares of common stock and 10,000,000 authorized shares of preferred stock. On October 13, 2009,
All American Pet Company, Inc., MD, held a stockholders’ meeting and the stockholders voted to increase the authorization
of common stock from 50,000,000 shares to 250,000,000 shares.  On February 28, 2011, All American Pet Company, Inc. MD
held a stockholders meeting and voted to increase the authorized number of $0.001 par value Common stock from 250,000,000 to 500,000,000.In
June 2012, All America Pet Company, Inc. MD merged into a Nevada Corporation, All American Pet Company, Inc. Concurrent with the
merger into All American Pet Company, Inc., the Board of Directors voted to increase the authorized number of common shares outstanding
to 1,010,000,000. In June 2013, our authorized number of common shares was increased to 3,000,000,000.





Private Offerings of Common Shares







During the year ended December 31, 2012,
the Company received and accepted subscriptions for 285,544,000 shares of unregistered common stock at $0.01 per share. The sale
of equity securities resulted in a capital increase of $ 3,012,441, after offering costs. The Company recorded a $677,156 common
stock payable at December 31, 2012 to reflect the value of the 77,598,571 of common shares not yet issued for cash receipts and
$187,894 of common stock value earned by various consultants during the year ended December 31, 2012. As of December 31, 2012,
there were 695,494,866 shares issued and outstanding.







Conversion of Preferred Stock to Common Stock





On February 27, 2009, the Company entered
into an agreement with the two preferred stockholders to convert all 56,500 shares of Series “A” Preferred shares held
by them in exchange for 5,000,000 shares of the Company’s common stock (the “Share Guarantee”).  The
delivery of the common stock to the preferred stockholders took place in March 2009 and the Company was released by the stockholders
from any and all future claims and liabilities. The preferred stockholders have the right to sell the common stock at a rate of
1,250,000 in the aggregate every 90 days starting May 15, 2009 and the right to sell at will after March 31, 2010. The Company
has agreed that the total value of the shares sold over the Liquidation Period, which is defined as the period from May 15, 2009
to April 30, 2010, to be at a minimum of $800,000 or the market value of 5,000,000 shares at $0.16 per share. If the value of the
shares sold during the Liquidation Period is less than $800,000, then the Company will have the right to purchase any unsold shares
at a price of $0.16 per share. If the gross proceeds from all sales is still less than $800,000 then the Company shall have the
right and not the obligation to make up the difference by making a cash payment on or before May 31, 2010.  In addition,
no later than June 15, 2010, the Company is obligated to issue an additional 3,000,000 shares of the common stock in total to these
stockholders if the sales proceeds and any additional payments made by the Company is less than $800,000.



The Share Guarantee was subsequently amended
to extend the Liquidation Period described above to March 31, 2011 and those amendments required the Company to issue 6,000,000
shares of common stock with a fair value of $400,000 in 2010. In connection with the Share Guarantee, the Company recognized an
additional expense, and a corresponding accrued liability, of $600,000 in 2010.



In October 2012, the Share Guarantee was
amended, subject to the Company’s ability to satisfy certain required payments and other conditions. As the Company did not
satisfy its contractual obligations, the amendment was cancelled and became null and void.



Although the Company’s contractual
obligations under the Share Guarantee terminated in 2011, management intends to fulfill the Company’s obligations under the
related agreements and amendments.  Based on the $800,000 amount of the guarantee, amounts realized by the counterparties
from selling related shares, and the number of shares the counterparties have left to sell, management estimates the Company’s
obligation under the Share Guarantee to be $400,000 as of December 31, 2012.



27







Warrants







There were no warrants issued in 2012 and
2011.  As of December 31, 2012, the Company has 5,000,000 warrants outstanding with a weighted average exercise price
per share of $0.17. The warrants were issued to the Chief Executive Officer and the President and expire in August 2018.





Stock Receivable



As described under “Legal Proceedings”,
on April 6, 2010, the Company settled litigation with a former controller in which the former controller agreed to return 400,000
shares of Company stock valued at $52,000 in exchange for $8,000 and payments of $1,571 over a 27 month period. The former controller
delivered the shares to an escrow agent and the escrow agent will return all of the shares to the Company once all of the payments
are made to the former employee.   In addition, on February 3, 2011, through mediation, the Company and a Federal Bankruptcy
Trustee settled litigation with a former sales person in which the former employee would return 750,000 shares of Company stock
valued at $90,000 in exchange for payments of $92,069 over a 14 month period. The Federal Bankruptcy trustee will return all of
the shares to the Company once all of the payments are made to the Bankruptcy Trustee.  The Company has recorded a $90,000
liability to the former sales person and a $90,000 common stock receivable for the shares being held by the bankruptcy trustee.
As of December 31, 2012 and 2011, common stock receivable aggregated $142,000.



Common Shares to Vendors and Consultants



During the year ended December 31, 2011,
the Company did not issue shares of common stock to consultants, vendors and/or professionals for services rendered. During the
year ended December 31, 2012, the Company issued 10,650,000 shares of unregistered common stock with a fair value of $187,894 to
consultants, vendors and/or professionals for services rendered.



28







Related Party Transactions





On March 6,
2012, the Board of Directors, comprised of the Chief Executive Officer and the President, who are husband and wife, authorized
the Company to execute a Convertible Revolving Grid Note for a principal sum of up to $1,000,000 with the Chief Executive Officer,
Barry Schwartz and the President, Lisa Bershan. The Grid note bears interest at 10% per year and may be converted into common stock
of the Company at a conversion price of $0.0022 any time before March 6, 2013. On March 1, 2013, this Note was renewed with the
following changes to the terms: Interest rate was lowered to 6.5% per year and the maturing date was amended to be due and payable
not later than 48 months from the original issue date of the Revolving Grid Note. See Form 8-K filed on March 1, 2013. As of December
31,2012, no advances on the Note were made. As of June 14, 2013, a total of $521,000 hasbeen
advanced to the Company on this Grid Note whereby increasing the holders’ beneficial ownership by 236,818,181 shares of common
stock. As of June 14, 2013, no portion of this Note has been converted into shares of common stock.







During the year ended December 31, 2012,
the Company made advances to, and received advances from, an entity owned by the Company’s Chief Executive Officer. These
advances are not collateralized and do not bear interest. As of December 31, 2012, no amounts are due from and no amounts are due
to this related entity.



Securities Authorized for Issuance
Under Equity Compensation Plans



The Board of Directors adopted the 2010
Non-Qualified Professional, Consultant, & Employee Stock Compensation Plan on September 8, 2010.  The purpose of the Plan is to provide compensation in the form of common stock of the Company to eligible professionals, consultants
and employees that have previously rendered services or that will render services during the term of the 2010 Plan.
The total number of shares of common stock to be subject to this Plan is 35,000,000.



The Plan shall be administered by the
Board of Directors, subject to the Company’s Bylaws, all decisions made by the Directors in selecting eligible Common Stockholders,
establishing the number of shares, and construing the provisions of this Plan shall be final and conclusive. Shares shall be granted
only to Professionals, Consultants and Employees that are within that class for which Form S-8 is applicable.





During the years ended December 31, 2012
and 2011, no common shares were issued under the Plan.





Purchases of Equity Securities by the
Issuer or Affiliated Purchasers



None.



ITEM 6.  SELECTED FINANCIAL
DATA



Pursuant to item 301(e) of Regulation
S-K, smaller reporting companies are not required to provide the information required by this section.



29







ITEM 7.  MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Overview





All American Pet Company, Inc. (“AAPT”
and the “Company”) is a developer and marketer of innovative pet wellness products including super premium dog foods
and antibacterial wipes. In 2011, AAPT produced, marketed, and sold two super-premium dog foods under the brand names Grrr-nola®Natural
Dog Food and Chompions®. BothGrrr-nola®Natural Dog Food and Chompions®
were the first dog food products that were formulated for canine heart health and endorsed by a veterinary cardiac surgeon. The
Company has launched its line of PAWtizerTM pet wipes and spray, the pet care industry’s first alcohol-free anti-bacterial
dog cleaner. The Company has also announced and is preparing to market its MuttTM Great Food for Great Dogs super premium
dry kibble dog food, and its NutraBarsTM line of portable, convenient and functional, super premium 4 ounce dog food bars.
Each 4 ounce bar has a kcal equivalent of 8 ounces of super premium dry dog food.



History of the Company and its Current
Status



All American Pet Company, Inc. was initially
organized under the laws of the State of New York (“All American Pet Company, Inc. NY”) in February 2003. In January
2006, All American Pet Company, Inc. NY merged into All American Pet Company, Inc. a Maryland Corporation (“All American
Pet Company, Inc. MD”). In June of 2012, All America Pet Company Inc. merged (the “Merger”) into a Nevada Corporation
(“All American Pet Company, Inc.”). The Company has formed a number of wholly owned subsidiaries to provide for accountability
of each of its operations. All American PetCo, Inc. was formed in January of 2008 to provide corporate infrastructure and management
services. All American Pet Brands, Inc. was formed in April of 2009 to conduct the Company’s warehousing and manufacturing
operation. In September of 2009 the Company signed a license and distribution agreement with AAP Sales and Distribution Inc., a
third party company that obtained the rights to manufacture and sell certain of the Company’s products on a non-exclusive
basis. AAP Sales and Distribution Inc.’s operations have been consolidated with All American Pet Company, Inc. based on accounting
guidelines for Variable Interest Entities. As used in this report, the terms “The Company” and “AAPT” refers
to All American Pet Company, Inc. MD before the Merger, and to All American Pet Company, Inc., and its wholly owned subsidiaries
and Variable Interest Entities after the Merger.





The Company has never operated at a profit
and is dependent upon additional financing to remain a going concern. Although the Company obtained approximately $3,000,000 from
the sale of the Company’s unregistered common stock during 2012, the Company requires substantial capital to execute its
business plan and pay its debts. The Company remains under significant financial strain primarily because of its low level of sales,
past due debts and limited operating funds. The limited amount of operating capital may preclude the Company’s ability to
execute its manufacturing, marketing, and distribution objectives or to continue operations. No assurance can be given that the
Company will secure adequate funds to sustain operations or that it will continue as a going concern.



30







Our executive offices are located at
1100 Glendon Ave., 17th Floor, Los Angeles, California 90024 and our telephone number at that location is
(310) 689-7355.  Our websites are www.allamericanpetcompany.com, www.nutrabar.com, www.pawtizer.com, www.facebook.com/nutrabar, www.facebook.com/pawtizer, www.vetresearchlibrary.com, http://issuu.com/nutrabar
and http://bewelllivelong.wordpress.com. The information on our websites are
not, and shall not be deemed to be, a part of this report or incorporated by reference into this or any other filing we make
with the Securities and Exchange Commission (the “SEC”).





Liquidity, Capital Resources and Going
Concern



Our liquidity requirements arise principally
from our working capital needs, including the cost of goods, inventory, marketing, officer compensation and payroll and general
and administrative costs. In the future, we intend to fund our liquidity requirements through a combination of cash flows from
operations and external financings.



Our principal sources of liquidity have
been sales of equity securities and borrowings. To meet our current requirements to operate, the Company has sold unregistered
common stock and is currently attempting to undertake the sale of additional equity securities. As new funds are obtained, our
principal uses of capital are to meet our operating requirements, production, marketing and advertising expenditures, and make
investments in inventory and equipment. Additional funds could be used to reduce past due taxes and other debts and payables. Until
cash generated from operations is sufficient to satisfy our future liquidity requirements, we will be investigating purchase order
and accounts receivable funding from different sources, as well as other sources of capital. We will also be looking to seek equity
capital through the issuance of additional common stock. As of December 31, 2012, there were no commitments or other known sources
for this funding other than a $1,000,000 credit facility commitment from the Company’s, Chief Executive Officer, Barry Schwartz,
and President, Lisa Bershan, provided to the Company in March 2012. On March 1, 2013, this credit facility
was renewed with the following changes to the terms: Interest rate was lowered to 6.5% per year and the maturing date was amended
to be due and payable not later than 48 months from the original issue date of the Revolving Grid Note. As of December 31, 2012,
no advanceswere made under this facility. As of June 14, 2013, a total of $521,000 has beenadvanced to the Company under the amended credit facility and such amount is convertible into 236,818,181 shares of the
Company’s common stock.Our need for significant future funding will likely result in significantadditional dilution to our stockholders.



31







Because of our lack of funding and limited
ability to adequately market our products, the Company has experienced slotting fees in excess of gross sales, and incurred high
costs in manufacturing and marketing our products. Further, the Company has incurred significant fixed costs, including officer
compensation, occupancy and public company costs. As a result, we have experienced large operating losses and negative cash flow.
We have funded our operations primarily through the issuance of equity securities and debt. Additional capital infusions will
be needed to manufacture, distribute and promote our products, sustain operations and make payments and settlements of existing
debts and obligations. We believe that our future profitability will depend on the commercial and consumer acceptance of our products,
effective marketing strategies, efficient production and proper execution of our business plan, as to all or any of which, no
assurance can be given. Additionally, success with our external financing strategies will be needed to effectuate our business
plans. Our limited operating history makes it difficult to evaluate our prospects for success and our revenue and profitability
potential, particularly for newly introduced products, is unproven. Furthermore, there can be no assurance that our external financing
strategies will yield any capital or the amount of capital necessary to execute our business plan.



In its report in connection with our 2012
consolidated financial statements, our independent registered public accounting firm included an explanatory paragraph expressing
substantial doubt about our ability to continue as a going concern.



Results of Operations for the Year
Ended December 31, 2012 compared with the Year Ended December 31, 2011



The following discussion of the results
of operations should be read in conjunction with our consolidated financial statements and notes thereto for each of the years
ended December 31, 2012 and December 31, 2011 included in this Annual Report.



For the year ended December 31, 2012,
gross sales decreased $35,025 from prior year due to the suspension of sales of bothGrrr-nola®
Natural Dog Food and Chompions® combined with the delay in going to market with two new products:
PAWtizerTM and NutraBarTM. Net sales for the year ended December 31, 2012 increased $106,854 over the prior year due
to the absence of slotting fees in 2012. Cost of goods sold decreased from $58,670 to $10,463 in the year ended December 31, 2012,
consistent with the decrease of sales. Sales in 2012 related principally to sales of PAWtizerTM and the Company’s
gross margin on these sales was 58%.



For the year ended December 31, 2012,
sales and marketing expenses increased by $65,872, from $417,208 in the year ended December 31, 2011 to $483,080 in the year ended
December 31, 2012. The increase is attributable to advertising expenses required to bring two new products, PAWtizerTM
and NutraBarTM, to market.





General and administrative expenses
increased by $1,202,477, from $1,512,550 in the year ended December 31, 2011 to $2,715,027 in the year ended December 31,
2012. This increase is primarily attributable to an increase of executive compensation in the amount of $341,172, increased
facility expense for the Shawnee, Kansas factory and warehouse of $343,648, and increased payroll expense of $343,706
required to bring the new products to market.







During the year ended December 31, 2012,
the Company recognized a gain on debt forgiveness to a former officer in the amount of $131,911, which was partially offset by
other losses attributable to settlements and judgments resulting in a net gain on forgiveness of debt of $79,851. The Company also
recognized a gain of $200,000 attributable to an adjustment to the Share Guarantee liability as discussed in Item 5.





32







Inventories grew in 2012 resulting in
an inventory balance of PAWtizerTM in the amount of $715,869 by December 31, 2012. Investments in machinery and equipment
grew from $2,542 as of December 31, 2011 to $69,366 as of December 31, 2012 consistent with the build-out of facilities necessary
to begin production of NutraBarTM. Deposits were made for other production equipment not received by December 31, 2012 in
the amount of $79,490.



Impact of Recently Issued Accounting
Statement



See Note 3 to the Notes to Consolidated
Financial Statements – “New Accounting Pronouncements.”



Critical
Accounting Policies/Estimates

Our consolidated financial statements
are prepared in conformity with accounting principles generally accepted in the United States of America. In preparing these financial
statements, we make assumptions, judgments and estimates that can have a significant impact on amounts reported in our financial
statements. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe
to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions
or conditions. On a regular basis we evaluate our assumptions, judgments and estimates and make changes accordingly. We believe
that, of the significant accounting policies discussed in our consolidated financial statements, the following accounting policies
require our most difficult, subjective or complex judgments:



Revenue Recognition, Sales Incentives
and Slotting Fees

Revenues are recognized upon passage of
title to the customer, typically upon product pick-up, shipment or delivery to customers.  The Company’s revenue
arrangements with its customers often include sales incentives and other promotional costs such as coupons, volume-based discounts,
slotting fees and off-invoice discounts.  These costs are typically referred to collectively as “trade spending.”
Pursuant to ASC Topic 605, these costs are recorded when revenue is recognized and are generally classified as a reduction of
revenue. Slotting fees refer to arrangements pursuant to which the retail grocer allows our products to be placed on the store’s
shelves in exchange for a slotting fee. Given that there are no written contractual commitments requiring the retail grocers to
allocate shelf space for twelve months, we expense the slotting fee at the time orders are first shipped to customers.



Stock-based compensation

The Company records stock-based compensation
in accordance with the guidance in ASC Topic 718, which requires the Company to recognize expenses related to the fair value of
its employee stock option awards.  This eliminates accounting for share-based compensation transactions using the intrinsic
value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the
cost of all share-based awards on a graded vesting basis over the vesting period of the award.



33







Transactions with non-employees in which
goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value
of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement
date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance
is complete or the date on which it is probable that performance will occur.



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA



The information required by Item 8 is included on pages F-1
to F-25.



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE



None.



ITEM 9A. CONTROLS AND PROCEDURES



Our management, with the participation
of the Company’s Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the Company’s
disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. In designing and evaluating
the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and
operated, can only provide reasonable assurance of achieving the desired control objectives and management is required to apply
its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, the Company’s
Principal Executive Officer and Principal Financial Officer have concluded that as of December 31, 2012, the Company’s disclosure
controls and procedures were not effective, at the reasonable assurance level, in recording, processing, summarizing and reporting,
on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange
Act and in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Principal
Financial and Accounting Officer, as appropriate to allow timely discussions regarding required disclosure; due to the material
weaknesses described below.



In light of the material weaknesses described
below, we performed additional analysis and other post-closing procedures to ensure that our consolidated financial statements
were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements
included in this report fairly present, in all material respects, our consolidated financial condition, results of operations,
changes in stockholders’ equity and cash flows for the periods presented.



34







Management’s Report on Internal
Control Over Financial Reporting



The Company’s management is responsible
for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies
and procedures that:



| | 1. | Pertain to the maintenance of
    records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Provide reasonable assurance that
    transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles
    generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only
    in accordance with authorizations of management and directors of the Company; and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Provide reasonable assurance regarding
    prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have
    a material effect on our financial statements.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



A material weakness is a control deficiency
(within the meaning of Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 5) or combination
of control deficiencies, that results in a reasonable possibility that a material misstatement of the annual or interim financial
statements will not be prevented or detected on a timely basis.



Under the supervision and with the participation
of our management, including our Principal Executive Officer and Principal Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting as of December 31, 2012 based on the framework in Internal Control
– Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Based on the results of management’s assessment and evaluation, our Principal Executive Officer and Principal Financial
Officer concluded that our internal control over financial reporting was not effective due to the material weaknesses described
below.



| | · | Inadequate
                                                                                                               resources.The Company
                                                                                                               did not consistently
                                                                                                               maintain a sufficient
                                                                                                               complement of personnel
                                                                                                               with an appropriate
                                                                                                               level of accounting
                                                                                                               knowledge, SEC
                                                                                                               experience and
                                                                                                               training to (i)
                                                                                                               ensure the timely
                                                                                                               and accurate preparation
                                                                                                               of interim and
                                                                                                               annual financial
                                                                                                               statements in accordance
                                                                                                               with accounting
                                                                                                               principles generally
                                                                                                               accepted in the
                                                                                                               United States of
                                                                                                               America (U.S. GAAP),
                                                                                                               (ii) effectively
                                                                                                               segregate certain
                                                                                                               incompatible functions,
                                                                                                               and (iii) remediate
                                                                                                               previously communicated
                                                                                                               deficiencies. In
                                                                                                               addition, the Company
                                                                                                               placed substantial
                                                                                                               reliance on manual
                                                                                                               procedures and
                                                                                                               detective controls
                                                                                                               that lacked adequate
                                                                                                               management monitoring
                                                                                                               for compliance.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



35









| | · | Control environment.We did not maintain an effective control environment. Specifically, we did not maintain: (i) a documented risk assessment process that adequately addresses COSO objectives, (ii) sufficient anti-fraud controls, including a whistleblower program, formal written policies and procedures for the review and approval of transactions with related parties, a qualified and independent audit committee, and directors that are independent of management, (iii) adequate monitoring of existing controls over financial reporting and individual and corporate performance against expectations, (iv) appropriate human resource policies, such as background investigations and consistent performance reviews for key personnel, and (v) adequate documentation of actions taken by the Board regarding: fraud oversight, review and approval of external financial statements, actions supporting executive performance and compensation.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | Period-end
                                                                                                                             financial
                                                                                                                             reporting
                                                                                                                             processes.
                                                                                                                             Effective
                                                                                                                             controls
                                                                                                                             over
                                                                                                                             period-end
                                                                                                                             financial
                                                                                                                             reporting
                                                                                                                             processes
                                                                                                                             were
                                                                                                                             not
                                                                                                                             maintained
                                                                                                                             to
                                                                                                                             effectively
                                                                                                                             ensure:
                                                                                                                             (i)
                                                                                                                             significant
                                                                                                                             agreements,
                                                                                                                             or
                                                                                                                             amendments
                                                                                                                             thereto,
                                                                                                                             are
                                                                                                                             analyzed
                                                                                                                             and
                                                                                                                             accurately
                                                                                                                             accounted
                                                                                                                             for
                                                                                                                             in
                                                                                                                             the
                                                                                                                             proper
                                                                                                                             period,
                                                                                                                             (ii)
                                                                                                                             key
                                                                                                                             reconciliations,
                                                                                                                             account
                                                                                                                             analyses,
                                                                                                                             and
                                                                                                                             summaries
                                                                                                                             are
                                                                                                                             performed
                                                                                                                             and
                                                                                                                             approved
                                                                                                                             with
                                                                                                                             appropriate
                                                                                                                             resolution
                                                                                                                             of
                                                                                                                             reconciling
                                                                                                                             items
                                                                                                                             in
                                                                                                                             a
                                                                                                                             timely
                                                                                                                             manner,
                                                                                                                             (iii)
                                                                                                                             journal
                                                                                                                             entries,
                                                                                                                             both
                                                                                                                             recurring
                                                                                                                             and
                                                                                                                             non-recurring,
                                                                                                                             are
                                                                                                                             analyzed
                                                                                                                             and
                                                                                                                             approved,
                                                                                                                             (iv)
                                                                                                                             the
                                                                                                                             resulting
                                                                                                                             financial
                                                                                                                             information,
                                                                                                                             statements
                                                                                                                             and
                                                                                                                             disclosures
                                                                                                                             are
                                                                                                                             reviewed
                                                                                                                             and
                                                                                                                             appropriate
                                                                                                                             checklists
                                                                                                                             are
                                                                                                                             used
                                                                                                                             for
                                                                                                                             compliance
                                                                                                                             with
                                                                                                                             U.S.
                                                                                                                             GAAP,
                                                                                                                             (v)
                                                                                                                             monthly
                                                                                                                             closing
                                                                                                                             quality
                                                                                                                             control
                                                                                                                             checklists
                                                                                                                             were
                                                                                                                             used
                                                                                                                             consistently
                                                                                                                             and
                                                                                                                             thoroughly
                                                                                                                             to
                                                                                                                             ensure
                                                                                                                             all
                                                                                                                             financial
                                                                                                                             reporting
                                                                                                                             procedures
                                                                                                                             and
                                                                                                                             controls
                                                                                                                             were
                                                                                                                             performed,
                                                                                                                             and
                                                                                                                             (vi)
                                                                                                                             documented
                                                                                                                             reviews
                                                                                                                             of
                                                                                                                             financial
                                                                                                                             results
                                                                                                                             are
                                                                                                                             compared
                                                                                                                             to
                                                                                                                             budgets
                                                                                                                             and
                                                                                                                             expectations.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | · | Cash expenditures.Effective controls related to expenditures were not maintained. Specifically, controls were not properly designed or operating effectively to ensure: (i) officer compensation, including benefits, are authorized, reviewed and approved on a timely basis, and are in accordance with contractual agreements and (ii) expenditures made by management contained adequate and appropriate supporting documentation to establish the related business purpose of the expenditure.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Remediation of Internal Control
Deficiencies and Expenditures



It is reasonably possible that, if not
remediated, one or more of the material weaknesses described above could result in a material misstatement in our reported financial
statements that might result in a material misstatement in a future annual or interim period. We are developing specific action
plans for each of the above material weaknesses. We are uncertain at this time of the costs to remediate all of the above listed
material weaknesses.



36







We believe that we are addressing the
deficiencies that affected our internal control over financial reporting as of December 31, 2012. Because the remedial actions
may require hiring of additional personnel, and relying extensively on manual review and approval, the successful operation of
these controls for at least several quarters may be required before management may be able to conclude that the material weaknesses
have been remediated. We intend to continue to evaluate and strengthen our internal control over financial reporting systems.
These efforts require significant time and resources. If we are unable to establish adequate internal control over financial reporting
systems, we may encounter difficulties in the audit or review of our financial statements by our independent registered public
accounting firm, which in turn may have a material adverse effect on our ability to prepare financial statements in accordance
with GAAP and to comply with our SEC reporting obligations.



Changes in Internal Control over Financial Reporting





There has been no change in our internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
period since our last quarterly report (September 30, 2012) and the date of this filing that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.





ITEM 9B.   OTHER INFORMATION



On January 30, 2013, the Board of Directors
approved a private placement offering of up to 200,000,000 shares of common stock at $0.01 per share.  This offering expired
on February 28, 2013. On March 1, 2013, the Boarded of Directors approved a private placement offering of up to 285,714,000 shares
of common stock at $0.007 per share.





On February 26, 2013, the Board of Directors
authorized the Company to amend the Convertible Revolving Grid Note for a principal sum of up to $1,000,000 with Chief Executive
Officer, Barry Schwartz, and President, Lisa Bershan, dated March 6, 2012. The amendment reduced interest to 6.5% per year, extended
the maturity date to four years, and extended the conversion date to October 31, 2013. Borrowings made under this credit facility
may be converted by the Chief Executive Officer and President into shares of the Company’s common stock at a conversion price
of $0.0022 per share. As of June 14, 2013, Mr. Schwartz and Ms. Bershan have loaned $521,000 to the Companyunder the terms of the grid note, and such amount is convertible into 236,818,181 shares of the Company’s common stock.



On February 12, 2013, the Company entered
into an unsecured, convertible promissory note with an unrelated third party for $103,500, less a $3,500 fee.  The loan bears
interest at 8% per annum and a balloon payment of principal and accrued interest is due on November 12, 2013.  At any
time 180 days after the date of the note, the lender can convert the principal and accrued interest into shares of the Company’s
common stock at a 39% discount based on the average of the lowest three trading prices during a ten day period ending one day
prior to the conversion date.



On June, 2013, the Board of Directors voted to increase authorized shares of common stock from 1 billion
ten million to 3 billion shares. As of June 14, 2013, there were 837,929,245 shares of common stock issued and outstanding and
77,598,571 subscribed but not yet issued.



37











During the periods from January 1, 2013
to June 14, 2013, the Company received and accepted subscriptions for 2,500,000 shares of common stock at $0.02 per share and 93,455,771
shares of common stock at $0.007 per share. The sales of equity securities resulted in a capital increase of $704,190, before offering
costs. Had the current balance of the Grid Note ($521,000) been converted into shares, shares of common stock issued and outstanding
would increase to 1,074,747,426. (See ITEM 7, Liquidity, Capital Resources and Going Concern).



PART III



ITEM 10.  DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE



The following is certain information regarding
our directors and executive officers:



|Name           |  | Position                                                        |  | Age |  | Director Since
|-------------- |  | --------------------------------------------------------------- |  | --- |  | --------------
|Barry Schwartz |  | Chief Executive Officer, and Chairman of the Board of Directors |  | 67  |  | February 2003 
|Lisa Bershan   |  | President, Secretary and Director                               |  | 57  |  | February 2003 



Biographical Information Regarding
Directors and Nominees



Barry Schwartzhas served
as Chief Executive Officer, President and Chief Financial Officer and a director of the Company since its inception in February
2003.  Mr. Schwartz relinquished the title of President when Lisa Bershan assumed that position in January of 2007.
Mr. Schwartz is a senior retail and operations executive with more than 30 years of experience in consumer durables and food.  From
1995 to 1997, Mr. Schwartz served as the President of Chorus Line Corp., where he helped launch a concept apparel chain for an
apparel manufacturer.  From 1997 to 1999, Mr. Schwartz served as the Vice President of Cache, Inc., a woman’s
apparel company, where he was responsible for the Company's profit and loss performance for the Northeast, Atlantic and Midwest
territories.  From 2000 to the Company's inception in 2003, Mr. Schwartz served as the President and Chief Executive
Officer of Whizgrill, Inc., a quick service, casual dining restaurant chain. In that capacity, Mr. Schwartz created an upscale
fast food concept that was competitive with other fast food chain stores.



Lisa Bershanbecame President
in January of 2007. She also held the positions of Executive Vice President, Secretary and a director of the Company since its
inception in February 2003. In 1978, Ms. Bershan founded Incredible Edibles, a chain of gourmet stores, which she sold in 1986
to Piedmont Specialty Foods. Ms. Bershan was the President and Chief Executive Officer of Incredible Edibles during this time
and also served on its Board of Directors. From 1986 to 1994, Ms. Bershan served as Vice President and Director of Sales with
Piedmont Specialty Foods where she helped launch numerous snack food products into major supermarket chains. In 1994, Ms. Bershan
founded Lisa's Gourmet Snacks, where she served as President and Chief Executive Officer and marketed unique foods including the
first baked chips under the Lisa's Incredible Edibles brand. In 1999, she founded Java Joint Candies, a unique caffeine enhanced
product and served as its President and Chief Executive Officer until 2001. Ms. Bershan was a consultant between 2001 and the
time she co-founded the Company in 2003.



38







Mr. Schwartz and Ms. Bershan are husband
and wife and are the Company’s only directors and officers.



Section 16(a) Beneficial Ownership Reporting Compliance





Corporate Governance



The Company’s
Code of Ethics will be provided without charge to any stockholder upon written request made to Secretary, All American Pet Company,
Inc.,1100 Glendon Ave., 17th Floor, Los Angeles, California 90024. The information
on our website is not, and shall not be deemed to be, a part of this proxy statement or incorporated by reference into this or
any other filing we make with the SEC.



Because of our small size and limited
resources, we do not presently have an Audit Committee, Compensation Committee or Nominating/Corporate Governance Committee.  Our
board of directors consists of Mr. Schwartz, and Ms. Bershan, who are husband and wife.  Neither Mr. Schwartz, nor Ms.
Bershan are independent as defined under NASDAQ Marketplace rules.  The Company intends to seek independent directors
and create standing committees of the board as the Company’s growth and financial conditions warrant.



We have adopted a code of ethics that
applies to our Chief Executive Officer and Principal Finance and Accounting officer or persons performing similar functions (as
well as our other employees, if any, and directors).



Meetings of the Board





The Board acted
by written consent 7 times in 2011and 24 times in 2012. Mr. Schwartz and Ms. Bershan attended
100% of the aggregate number of meetings of the Board and committees on which the director served in 2011 and 2012.





39







ITEM 11.  EXECUTIVE
COMPENSATION



The following table sets forth the cash
compensation of the Company’s executive officers during the last fiscal year of the Company.  The remuneration
described in the table does not include the cost to the Company for benefits if any furnished to the named executive officers,
including premiums for health insurance and other benefits provided to such individuals that are extended in connection with the
conduct of the Company’s business.



|SUMMARY COMPENSATION TABLE     
|-------------------------------
|Name and
    Principal Position
|Barry Schwartz,                
|CEO/Director                   
|                               
|                               
|Lisa Bershan,                  
|President/Director             
|                               



| | (1) | Includes $18,000 auto allowance, $12,000 insurance allowance,
                                                                 and accrued vacation pay of $15,746
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Includes $12,000 auto allowance and accrued vacation pay
                                                                 of $14,969.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------



Employment Agreements with Officers



On August 24, 2008, All American Pet Company,
Inc. executed five and one-half-year Employment Agreements with Mr. Barry Schwartz, as Chief Executive Officer and Director and
Ms. Lisa Bershan, as President and Director. The agreements expire on January 31, 2014. During the year ended December 31, 2012,
compensation paid to our Chief Executive Officer and President exceeded the amounts established in the respective employment agreements.



40







Barry Schwartz



Pursuant to the August 24, 2008 Employment
Agreement, we agreed to compensate Mr. Schwartz with a starting base salary of $150,000 per year for his services.  Base
salary calls for increases each year of service. The base salary was $195,255 in 2012 and $179,626 in 2011. Additionally, in 2012
total compensation includes allowances for auto and insurance ($18,000 and $12,000, respectively) and accrued vacation pay of
$15,746, as well as bonuses of $136,179.



Lisa Bershan



Pursuant to the August 24, 2008 Employment
Agreement, we agreed to compensate Ms. Bershan with a starting base salary of $150,000 per year for her services.  Base
salary calls for increases each year of service. The base salary was $195,255 in 2012 and $179,626 in 2011. Additionally, in 2012
total compensation includes allowances for auto and insurance ($18,000 and $12,000, respectively) and accrued vacation pay of
$15,746, as well as bonuses of $136,179.



Director Compensation



Directors currently do not receive any
cash compensation for serving on the Board of Directors, or for any other services rendered to the Company in their capacity as
a director of the Company, but are reimbursed for expenses they incur in connection with their attendance.





Compensation Analysis



The Board of Directors has the authority
to engage, terminate and pay compensation consultants, independent legal counsel and other advisors in its discretion.  Prior
to retaining any such compensation consultant or other advisor, the Board evaluates the experience and capabilities of such advisor.
The Board also evaluates the independence of such advisor and whether such advisor has a conflict of interest.  During 2011
and 2012, the Company did not use an external compensation consultant to evaluate and set executive compensation; however, during
2013, the Board engaged an independent compensation consulting firm to provide advisory services with regard to 2012 executive
compensation.   This firm, Performensation, concluded that, given the Company’s current compensation philosophy
of focusing pay on salary bonus potential and perquisites, such as auto allowance, total compensation for both Mr. Schwartz and
Ms. Bershan are within a given range of reasonableness for a company within the Company’s peer group.





Certain Relationships and Related
Transactions



As of December 31, 2012 and 2011, the
Company owed a total of $0 and $0, respectively, to the officers of the Company for reimbursement of expenses.



As of December 31, 2012 and 2011, the
Company owed a total of $0 and $47,446, respectively, to the officers of the Company for accrued salaries.





On March 6,
2012, the Board of Directors authorized the Company to execute a Convertible Revolving Grid Note (the “Note”) for a
principal sum of up to $1,000,000 with Chief Executive Officer, Barry Schwartz and President, Lisa Bershan. The Note bears interest
at 10% per year and may be converted into common stock of the Company at a conversion price of $0.0022 any time before March 6,
2013. On March 1, 2013, the Note was renewed with the following changes to the terms. Interest rate was lowered to 6.5% per year
and the maturing date was amended to be due and payable not later than 48 months from the original issue date of the Note. As of
December 31, 2012, no advances on the Note were made. See Item 13 below and Form 8-K filed on March 1, 2013. As of June 14, 2013
a total of$521,000 has been advanced to the Company on the Note allowing the holders
to convert the Note into as much as 236,818,181 shares of the Company’s common stock at the Note’s current balance.





During the year ended December 31, 2012,
the Company made advances to, and received advances from, an entity owned by the Company’s Chief Executive Officer. These
advances are not collateralized and do not bear interest. As of December 31, 2012, no amounts are due from and no amounts are due
to this related entity.



41







Equity Compensation Plans



We established an equity compensation
plan on September 30, 2010, which may be utilized to compensate directors, officers or employees and certain qualifying consultants
or vendors of goods and services.  The plan authorizes the issue of up to 35,000,000 shares of common stock. No shares
have been issued under this plan as of December 31, 2012.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS





The following table sets forth information
regarding the beneficial ownership of shares of the Company’s common stock as of June 14, 2013 by (i) all stockholders
known to the Company to be beneficial owners of more than 5% of the outstanding common stock; (ii) each director and executive
officer of the Company individually and (iii) all directors and executive officers of the Company as a group:





|Name and addressof beneficial owner(1)                                     |  | Amount of BeneficialOwnership(2) |             |  | Percent ofClass(3) | 
|-------------------------------------------------------------------------- |  | -------------------------------- | ----------- |  | ------------------ | 
|5% Holders                                                                 |  |                                  |             |  |                    | 
|                                                                           |  |                                  |             |  |                    | 
|Directors and Officers                                                     |  |                                  |             |  |                    | 
|Barry Schwartz (2) (4)1100 Glendon Avenue, 17th FloorLos Angeles, CA 90024 |  |                                  | 20,437,363  |  |                    | 
|                                                                           |  |                                  |             |  |                    | 
|Lisa Bershan (2) (4)1100 Glendon Avenue, 17th FloorLos Angeles, CA 90024   |  |                                  | 17,432,639  |  |                    | 
|                                                                           |  |                                  |             |  |                    | 
|Barry Schwartz and Lisa Bershan [see Item 11] (5)                          |  |                                  | 236,818,181 |  |                    | 
|                                                                           |  |                                  |             |  |                    | 
|All executive officers and directors as a group.                           |  |                                  | 274,688,183 |  |                    | 







42







(1) Except as noted in any footnotes below,
each person has sole voting power and sole dispositive power as to all of the shares shown as beneficially owned by them.





(2) Other than as footnoted below, or as
indicated under ITEM 13 with regard to shares issuable under a Convertible Revolving Grid Note,none
of these security holders has the right to acquire any amount of the shares within 60 days following December 31, 2012 from options,
warrants, convertible securities or similar obligations.









(3) Percentage ownership is based on 1,074,747,426
shares of common stock outstanding on June 14, 2013. This amount is the sum of a) actual shares issued and outstanding (837,929,245)
and b) the increase of shares (236,818,181) required by the conversion feature of the Grid Note. See ITEM 13. Beneficial ownership
is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.
Shares of common stock subject to options, warrants and convertible notes currently exercisable or convertible, or exercisable
or convertible within 60 days, are deemed outstanding for determining the number of shares beneficially owned and for computing
the percentage ownership of the person holding such options, but are not deemed outstanding for computing the percentage ownership
of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named
in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.



(4)Mr. Schwartz and Ms.
Bershan are husband and wife and each disclaims beneficial ownership of the shares owned by the other.





(5) As of June 14, 2013, there were $521,000 advances made on
the Grid Note equal to 236,818,181 beneficial shares due to its conversion feature. See Item 13.



ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE



The Company has not adopted formal written
policies and procedures for the review and approval of transactions with related parties.



On March 6, 2012, the Board of Directors authorized the Company to execute a Convertible Revolving Grid
Note (the “Note”) for a principal sum of up to $1,000,000 with Chief Executive Officer, Barry Schwartz and President,
Lisa Bershan. The Note bears interest at 10% per year and may be converted into common stock of the Company at a conversion price
of $0.0022 any time before March 6, 2013. On March 1, 2013, the Note was renewed with the following changes to the terms. Interest
rate was lowered to 6.5% per year and the maturing date was amended to be due and payable not later than 48 months from the original
issue date of the Note. Should the holders of the note elect to convert
the outstanding principal balance and unpaid accrued interest that may at any time be owing to the lenders, then any shares received
on such conversion or conversions shall be locked up and not subject to sale, transfer or hypothecation of any kind whatsoever
until the earliest to occur of:







| | i. | 24 months from the date or dates of any such conversion, or
| | -- | -----------------------------------------------------------



| | ii. | the average closing price per share, as determined over a period of 30 trading days ending one trading day prior to the notice date of conversion, is not less than $0.035 per share, subject to adjustment for share dividends, forward splits of common stock or reverse splits of common stock, as may be appropriate, or
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | the sale of the registrant or substantially all of its business, or
| | ---- | -------------------------------------------------------------------



| | iv. | merger of the registrant with another corporation where the current shareholders as a group do not own at least 51% of the resulting merged entity.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------



See Form
8-K filed by the Company on March 1, 2013. As of December 31, 2012, no advances on the Note were made. As of June 14, 2013 a
totalof $521,000has been advanced to the Company on the Note and such amount is
convertible into 236,818,181 shares of the Company’s common stock.





43









No Director Independence





Our Board of Directors is made up of Barry
Schwartz and Lisa Bershan, who are husband and wife. Mr. Schwartz also serves as the Company's Chief Executive Officer and Chief
Financial and Accounting Officer and Ms. Bershan also serves as the President.  Since we are not currently subject to
corporate governance standards relating to the independence of our directors, we choose to define an "independent" director
in accordance with the NASDAQ Global Market's requirements for independent directors (NASDAQ Marketplace Rule 4200).  The
Board has determined that neither Mr. Schwartz nor Ms. Bershan is independent as defined under NASDAQ Marketplace rules.



ITEM 14. PRINCIPAL ACCOUNTANT FEES
AND SERVICES





DeJoya Griffith, LLC served as our independent
registered public accounting firm for fiscal year 2011 and the first two 10-Q filings in 2012. Haskell & White LLP served as
our independent registered public accounting firm for our fiscal year 2012 audit and third quarter 2012 10-Q filing.





Aggregate fees billed to us for the year
ended December 31, 2012 by Haskell & White LLP were as follows:



(1) Audit Fees: $37,800



Haskell & White LLP did not provide any other professional
services in the year ended December 31, 2012.



PART IV



ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES



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

Financial Statements:



(i) The consolidated financial statements of All American Pet
Company, Inc. under Item 8 of this Annual Report are listed on the “Index to Consolidated Financial Statements”
on page F-1 of this report.



(b) Exhibits: THIS SECTION
NEEDS TO BE UPDATED BY LEGAL



|              |  |                                                                                                                 |  |               |  | Incorporated by reference
|------------- |  | --------------------------------------------------------------------------------------------------------------- |  | ------------- |  | -------------------------
|ExhibitNumber |  | Exhibit Description                                                                                             |  | Filedherewith |  | Form                     
|              |  |                                                                                                                 |  |               |  |                          
|4.2           |  | Specimen Series A Preferred Stock Certificate.                                                                  |  |               |  | 10-KSB                   
|              |  |                                                                                                                 |  |               |  |                          
|4.3           |  | Agreement, effective November 30, 2005, by and between the Company and Nortia Capital Partners,
    Inc.        |  |               |  | SB-2/A-3                 
|              |  |                                                                                                                 |  |               |  |                          
|10.1          |  | Equipment Lease Agreement dated March 8, 2006 by and between Bev-Lin Enterprises, Inc. and
    All American Pet |  |               |  | SB-2                     



44







|              |  |                                                                                                      |  |               |  | Incorporated by reference
|------------- |  | ---------------------------------------------------------------------------------------------------- |  | ------------- |  | -------------------------
|ExhibitNumber |  | Exhibit Description                                                                                  |  | Filedherewith |  | Form                     
|              |  |                                                                                                      |  |               |  |                          
|10.2          |  | Form of Subscription Agreement.                                                                      |  |               |  | SB-2                     
|              |  |                                                                                                      |  |               |  |                          
|10.3          |  | Letter Agreement with L. Phillips Brown.                                                             |  |               |  | SB-2                     
|              |  |                                                                                                      |  |               |  |                          
|10.4          |  | Lease Agreement dated January 18, 2005 for rental of office premises.                                |  |               |  | SB-2                     
|              |  |                                                                                                      |  |               |  |                          
|10.5          |  | Lease Agreement dated March 6, 2006 for rental of warehouse space.                                   |  |               |  | SB-2/A-3                 
|              |  |                                                                                                      |  |               |  |                          
|10.6          |  | Loan Agreement dated as of April 27, 2004, by and between the Company and George LaCapra.            |  |               |  | SB-2                     
|              |  |                                                                                                      |  |               |  |                          
|10.7          |  | Broker Agreement dated August 1, 2006 between Crossmark, Inc. and All American Pet Company,
    Inc. |  |               |  | SB-2                     
|              |  |                                                                                                      |  |               |  |                          
|10.8          |  | Loan Agreement dated as of August 29, 2006 by and between the Company and Barry Schwartz.            |  |               |  | 10-KSB                   
|              |  |                                                                                                      |  |               |  |                          
|10.9          |  | Loan Agreement dated as of October 10, 2006 by and between the Company and Eckard Kirsch.            |  |               |  | 10-KSB                   
|              |  |                                                                                                      |  |               |  |                          
|10.10         |  | Loan Agreement dated as of October 27, 2006 by and between the Company and Eckard Kirsch.            |  |               |  | 10-KSB                   
|              |  |                                                                                                      |  |               |  |                          
|10.11         |  | Loan Agreement dated as of November 7, 2006 by and between the Company and Eckard Kirsch.            |  |               |  | 10-KSB                   
|              |  |                                                                                                      |  |               |  |                          
|10.12         |  | Loan Agreement dated as of November 21, 2006 by and between the Company and Eckard Kirsch.           |  |               |  | 10-KSB                   
|              |  |                                                                                                      |  |               |  |                          
|10.13         |  | Loan Agreement dated as of December 27, 2006 by and between the Company and Eckard Kirsch.           |  |               |  | 10-KSB                   
|              |  |                                                                                                      |  |               |  |                          
|10.14         |  | Lease Agreement Dated July 21, 2008 - Rental agreement for new office space.                         |  |               |  | 10-K                     
|              |  |                                                                                                      |  |               |  |                          
|10.15         |  | Standard Sublease dated July 21, 2008                                                                |  |               |  | 10-K                     
|              |  |                                                                                                      |  |               |  |                          
|10.16         |  | Addendum No. 1 to Standard Sublease dated July 21, 2008                                              |  |               |  | 10-K                     
|              |  |                                                                                                      |  |               |  |                          
|10.17         |  | Debt Conversion Agreement – Barry Schwartz – Dated June 20, 2008                                     |  |               |  | 10-K                     
|              |  |                                                                                                      |  |               |  |                          
|10.18         |  | Debt Conversion Agreement – Lisa Bershan – Dated June 20, 2008                                       |  |               |  | 10-K                     



45







|              |  |                                                                                                                            |  |               |  | Incorporated by reference
|------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | ------------- |  | -------------------------
|ExhibitNumber |  | Exhibit Description                                                                                                        |  | Filedherewith |  | Form                     
|              |  |                                                                                                                            |  |               |  |                          
|10.19         |  | Employment Agreement – Barry Schwartz – Dated August 24, 2008                                                              |  |               |  | 10-K                     
|              |  |                                                                                                                            |  |               |  |                          
|10.20         |  | Employment Agreement – Lisa Bershan – Dated August 24, 2008                                                                |  |               |  | 10-K                     
|              |  |                                                                                                                            |  |               |  |                          
|10.21         |  | Warrant Agreement – Barry Schwartz – Dated August 24, 2008                                                                 |  |               |  | 10-K                     
|              |  |                                                                                                                            |  |               |  |                          
|10.22         |  | Warrant Agreement – Lisa Bershan – Dated August 24, 2008                                                                   |  |               |  | 10-K                     
|              |  |                                                                                                                            |  |               |  |                          
|31.1          |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
    Act                             |  | X             |  |                          
|31.2          |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
    Act                             |  | X             |  |                          
|32.1          |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906
    of the Sarbanes-Oxley Act |  | X             |  |                          
|32.2          |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act                                 |  | X             |  |                          



46







SIGNATURES



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



|Date: June 17, 2013 |  |  |  | By: | /S/ BARRY SCHWARTZ | 
|------------------- |  |  |  | --- | ------------------ | 



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



|Name               |  | Title                   |  | Date         
|------------------ |  | ----------------------- |  | -------------
|                   |  |                        
|/S/ BARRY SCHWARTZ |  | Chairman of the Board,  |  | June 17, 2013
|Barry Schwartz     |  | Chief Executive Officer |  |              
|                   |  |                        
|/S/ LISA BERHSAN   |  | President, Director     |  | June 17, 2013
|Lisa Bershan       |  |                         |  |              



47











ALL AMERICAN PET COMPANY, INC.



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



FOR THE YEARS ENDED DECEMBER 31, 2012
and 2011



|                                                                               | PAGES     
|------------------------------------------------------------------------------ | ----------
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM – HASKELL & WHITE LLP  |           
|                                                                               |           
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM – DEJOYA GRIFFITH, LLC |           
|                                                                               |           
|CONSOLIDATED BALANCE SHEETS                                                    | F-1       
|                                                                               |           
|CONSOLIDATED STATEMENTS OF OPERATIONS                                          | F-2       
|                                                                               |           
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT                               | F-3       
|                                                                               |           
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                          | F-4       
|                                                                               |           
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                     | F-5 – F-20















REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



To the Board of Directors

All American Pet Company, Inc.



We have audited the accompanying consolidated
balance sheet of All American Pet Company, Inc. (the “Company”) as of December 31, 2012, and the related consolidated
statements of operations, stockholders’ deficit, and cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.



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



In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the consolidated financial position of All American Pet
Company, Inc. as of December 31, 2012, and the consolidated results of its operations and its cash flows for the year then ended,
in conformity with accounting principles generally accepted in the United States.



The accompanying consolidated financial
statements have been prepared assuming the Company will continue as a going concern. As described in Note 1 to the consolidated
financial statements, the Company has a history of experiencing operating losses, cash flow deficits and nominal revenues. Further,
as of December 31, 2012, the Company has a working capital deficit, significant amounts of past due debts, a stockholders’
deficit, and insufficient liquidity to operate its business for a period of at least twelve months. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern. Management's plans regarding these matters are also described
in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.



|                   | /s/ Haskell & White LLP
|------------------ | -----------------------
|                   |                        
|                   | HASKELL & WHITE LLP    
|                   |                        
|Irvine, California |                        
|June 17, 2013      |                        















|Office Locations
        Las Vegas, NV
        New York, NY
        Pune, India
        Beijing, China | 
|------------------------------------------------------------------------------------------------------ | 









REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



To the Board of Directors and Stockholders

All American Pet Company, Inc. & Subsidiaries



We have audited the accompanying consolidated
balance sheet of All American Pet Company, Inc. & Subsidiaries (the “Company”) as of December 31, 2011 and the
related consolidated statements of operations, stockholders’ deficit and cash flows for the year ended December 31, 2011.
All American Pet Company, Inc. & Subsidiaries’ management is responsible for these financial statements. Our responsibility
is to express an opinion on these financial statements based on our audit.



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



In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of All American Pet Company, Inc. & Subsidiaries
as of December 31, 2011 and the results of their operations and their cash flows for the year ended December 31, 2011 in conformity
with accounting principles generally accepted in the United States of America.



The accompanying financial statements have
been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company
has suffered losses from operations, which raise substantial doubt about its ability to continue as a going concern. Management’s
plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.





/s/ De Joya Griffith, LLC

Henderson, Nevada

September 27, 2012













ALL AMERICAN PET COMPANY, INC.

CONSOLIDATED BALANCE SHEETS





|                                                                                                                                                                                                           |  | December 31, |             |   | December 31, |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------- | - | ------------ | -
|                                                                                                                                                                                                           |  | 2012         |             |   | 2011         |  
|ASSETS                                                                                                                                                                                                     |  |              |             |   |              |  
|Current Assets:                                                                                                                                                                                            |  |              |             |   |              |  
|Cash                                                                                                                                                                                                       |  | $            | 13,376      |   |              | $
|Inventory                                                                                                                                                                                                  |  |              | 715,869     |   |              |  
|Prepaid Expenses                                                                                                                                                                                           |  |              | -           |   |              |  
|Total current assets                                                                                                                                                                                       |  |              | 729,245     |   |              |  
|Machinery and equipment, net                                                                                                                                                                               |  |              | 69,366      |   |              |  
|Other assets                                                                                                                                                                                               |  |              | 85,290      |   |              |  
|TOTAL ASSETS                                                                                                                                                                                               |  | $            | 883,901     |   |              | $
|                                                                                                                                                                                                           |  |              |             |   |              |  
|LIABILITIES & STOCKHOLDERS' DEFICIT                                                                                                                                                                        |  |              |             |   |              |  
|Current Liabilities:                                                                                                                                                                                       |  |              |             |   |              |  
|Bank overdraft                                                                                                                                                                                             |  | $            | 90,095      |   |              | $
|Accounts payable                                                                                                                                                                                           |  |              | 2,605,638   |   |              |  
|Accounts payable due to former officer                                                                                                                                                                     |  |              | -           |   |              |  
|Current portion contest prize                                                                                                                                                                              |  |              | 133,332     |   |              |  
|Settlement and judgments payable                                                                                                                                                                           |  |              | 877,999     |   |              |  
|Share guarantee liability                                                                                                                                                                                  |  |              | 400,000     |   |              |  
|Accrued wages                                                                                                                                                                                              |  |              | 36,678      |   |              |  
|Placement fees payable                                                                                                                                                                                     |  |              | 54,372      |   |              |  
|Accrued payroll taxes                                                                                                                                                                                      |  |              | 889,711     |   |              |  
|Notes payable in default,  net of debt discount                                                                                                                                                            |  |              | 50,000      |   |              |  
|Accrued interest                                                                                                                                                                                           |  |              | 47,897      |   |              |  
|Total current liabilities                                                                                                                                                                                  |  |              | 5,185,722   |   |              |  
|Long-term Liabilities:                                                                                                                                                                                     |  |              |             |   |              |  
|Net present value contest prize obligation                                                                                                                                                                 |  |              | 269,518     |   |              |  
|Total long-term liabilities                                                                                                                                                                                |  |              | 269,518     |   |              |  
|TOTAL LIABILITTIES                                                                                                                                                                                         |  |              | 5,455,240   |   |              |  
|                                                                                                                                                                                                           |  |              |             |   |              |  
|COMMITMENTS AND CONTINGENCIES (Notes 8-12)                                                                                                                                                                 |  |              |             |   |              |  
|Stockholders' deficit                                                                                                                                                                                      |  |              |             |   |              |  
|Common stock, $0.001 par value; authorized 1,010,000,000 shares at December 31, 2012 (695,494,866 issued and outstanding) and 500,000,000 shares at December 31, 2011 (254,804,866 issued and outstanding) |  |              | 695,495     |   |              |  
|Additional paid-in capital                                                                                                                                                                                 |  |              | 18,486,273  |   |              |  
|Common stock payable                                                                                                                                                                                       |  |              | 677,156     |   |              |  
|Common stock receivable                                                                                                                                                                                    |  |              | (142,000    | ) |              |  
|Accumulated deficit                                                                                                                                                                                        |  |              | (23,729,397 | ) |              |  
|Non-controlling interest                                                                                                                                                                                   |  |              | (558,866    | ) |              |  
|Total Stockholders’ deficit                                                                                                                                                                                |  |              | (4,571,339  | ) |              |  
|TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                                                |  | $            | 883,901     |   |              | $





See accompanying notes to the consolidated financial statements and the reports of the independent registered
public accounting firms.



F-1







|ALL AMERICAN PET COMPANY, INC.       
|-------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS





|                                                                         |  | Years Ended December 31, |            
|------------------------------------------------------------------------ |  | ------------------------ | -----------
|                                                                         |  | 2012                     |            
|                                                                         |  |                          |            
|Revenue                                                                  |  | $                        | 24,701     
|Slotting fees                                                            |  |                          | -          
|Net sales                                                                |  |                          | 24,701     
|                                                                         |  |                          |            
|Cost of goods sold                                                       |  |                          | 10,463     
|GROSS PROFIT (LOSS)                                                      |  |                          | 14,238     
|                                                                         |  |                          |            
|OPERATING EXPENSES                                                       |  |                          |            
|Sales and marketing                                                      |  |                          | 483,080    
|General and administrative                                               |  |                          | 2,715,027  
|Impairment of inventory                                                  |  |                          | -          
|Loss on abandonment of machinery and equipment                           |  |                          | -          
|TOTAL OPERATING EXPENSES                                                 |  |                          | 3,198,107  
|                                                                         |  |                          |            
|LOSS FROM OPERATIONS                                                     |  |                          | (3,183,869 
|                                                                         |  |                          |            
|OTHER EXPENSE/(INCOME)                                                   |  |                          |            
|Gain on forgiveness of debt                                              |  |                          | (79,851    
|Interest expense                                                         |  |                          | 102,749    
|Reduction of share guarantee liability (Note 8)                          |  |                          | (200,000   
|Debt discount amortization                                               |  |                          | -          
|TOTAL OTHER EXPENSE                                                      |  |                          | (177,102   
|                                                                         |  |                          |            
|LOSS BEFORE TAXES                                                        |  |                          | (3,006,767 
|                                                                         |  |                          |            
|Provision for income taxes                                               |  |                          | -          
|NET LOSS                                                                 |  |                          | (3,006,767 
|                                                                         |  |                          |            
|Net loss attributable to noncontrolling interest                         |  |                          | 210,486    
|                                                                         |  |                          |            
|NET LOSS ATTRIBUTABLE TO ALL AMERICAN PET COMPANY, INC.                  |  | $                        | (2,796,281 
|                                                                         |  |                          |            
|BASIC AND DILUTED LOSS PER COMMON SHARE                                  |  | $                        | (0.006     
|                                                                         |  |                          |            
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (BASIC AND DILUTED) |  |                          | 472,237,035





See accompanying notes to the consolidated financial statements and the reports of the independent registered
public accounting firms.



F-2







ALL AMERICAN PET COMPANY, INC.

STATEMENT OF SHAREHOLDERS' DEFICIT





|                                                              |  |        |             |  | COMMON |   |         | ADDITIONAL |  |   | COMMON     |   |  | COMMON     |         |  |             |   |          | NON-        |  |   | TOTAL         |  
|------------------------------------------------------------- |  | ------ | ----------- |  | ------ | - | ------- | ---------- |  | - | ---------- | - |  | ---------- | ------- |  | ----------- | - | -------- | ----------- |  | - | ------------- | -
|                                                              |  | COMMON |             |  | STOCK  |   |         | PAID-IN    |  |   | STOCK      |   |  | STOCK      |         |  | ACCUMULATED |   |          | CONTROLLING |  |   | STOCKHOLDERS' |  
|                                                              |  | STOCK  |             |  | AMOUNT |   |         | CAPITAL    |  |   | PAYABLE    |   |  | RECEIVABLE |         |  | DEFICIT     |   |          | INTEREST    |  |   | DEFICIT       |  
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|BALANCE AT 31-Dec-10                                          |  |        | 221,213,571 |  |        | $ | 221,214 |            |  | $ | 15,379,733 |   |  | $          | -       |  |             | $ | (52,000  | )           |  | $ | (18,717,315   | )
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Conversion of note payable - unrelated party                  |  |        | 12,741,295  |  |        |   | 12,741  |            |  |   | 103,306    |   |  |            | -       |  |             |   | -        |             |  |   | -             |  
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Stock issued through private placement, net offering costs    |  |        | 19,650,000  |  |        |   | 19,650  |            |  |   | 104,760    |   |  |            | -       |  |             |   | -        |             |  |   | -             |  
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Stock issued as placement fees                                |  |        | 1,200,000   |  |        |   | 1,200   |            |  |   | 1,200      |   |  |            | -       |  |             |   | -        |             |  |   | -             |  
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Common stock payable                                          |  |        | -           |  |        |   | -       |            |  |   | -          |   |  |            | 569,642 |  |             |   | -        |             |  |   | -             |  
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Common stock receivable                                       |  |        | -           |  |        |   | -       |            |  |   | -          |   |  |            | -       |  |             |   | (90,000  | )           |  |   | -             |  
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Net loss attributable to non-controlling interest             |  |        | -           |  |        |   | -       |            |  |   | -          |   |  |            | -       |  |             |   | -        |             |  |   | -             |  
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Net loss                                                      |  |        | -           |  |        |   | -       |            |  |   | -          |   |  |            | -       |  |             |   | -        |             |  |   | (2,215,801    | )
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|BALANCE AT 31-Dec-11                                          |  |        | 254,804,866 |  |        |   | 254,805 |            |  |   | 15,588,999 |   |  |            | 569,642 |  |             |   | (142,000 | )           |  |   | (20,933,116   | )
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Conversion of note payable - unrelated party                  |  |        | 133,178,000 |  |        |   | 133,178 |            |  |   | 47,504     |   |  |            | -       |  |             |   | -        |             |  |   | -             |  
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Stock issued through private placement, net of offering costs |  |        | 285,544,000 |  |        |   | 285,544 |            |  |   | 2,726,897  |   |  |            | -       |  |             |   | -        |             |  |   | -             |  
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Stock issued for services                                     |  |        | 10,650,000  |  |        |   | 10,650  |            |  |   | 177,244    |   |  |            | -       |  |             |   | -        |             |  |   | -             |  
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Stock issued as placement fees                                |  |        | 11,318,000  |  |        |   | 11,318  |            |  |   | (54,371    | ) |  |            | -       |  |             |   | -        |             |  |   | -             |  
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Common stock payable                                          |  |        | -           |  |        |   | -       |            |  |   | -          |   |  |            | 107,514 |  |             |   | -        |             |  |   | -             |  
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Net loss attributable to non-controlling interest             |  |        | -           |  |        |   | -       |            |  |   | -          |   |  |            | -       |  |             |   | -        |             |  |   | -             |  
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|Net loss                                                      |  |        | -           |  |        |   | -       |            |  |   | -          |   |  |            | -       |  |             |   | -        |             |  |   | (2,796,281    | )
|                                                              |  |        |             |  |        |   |         |            |  |   |            |   |  |            |         |  |             |   |          |             |  |   |               |  
|BALANCE AT 31-Dec-12                                          |  |        | 695,494,866 |  |        | $ | 695,495 |            |  | $ | 18,486,273 |   |  | $          | 677,156 |  |             | $ | (142,000 | )           |  | $ | (23,729,397   | )





See accompanying notes to the consolidated financial statements and the reports of the independent registered
public accounting firms.







F-3







ALL AMERICAN PET COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH
FLOWS





|                                                                           |  | Years Ended December 31, |           
|-------------------------------------------------------------------------- |  | ------------------------ | ----------
|                                                                           |  | 2012                     |           
|CASH FLOWS FROM OPERATING ACTIVITIES                                       |  |                          |           
|Net loss                                                                   |  | $                        | (3,006,767
|Adjustments to reconcile net loss to net cash used in operating activities |  |                          |           
|Depreciation and amortization                                              |  |                          | 12,750    
|Impairment of inventory                                                    |  |                          | -         
|Amortization of contest prize                                              |  |                          | 24,317    
|Loss on abandonment of machinery and equipment                             |  |                          | -         
|Amortization of debt discount                                              |  |                          | -         
|Common stock issued for services                                           |  |                          | 187,894   
|Reduction of share guarantee liability                                     |  |                          | (200,000  
|(Increase) decrease in:                                                    |  |                          |           
|Inventory                                                                  |  |                          | (715,869  
|Other assets                                                               |  |                          | 16,664    
|Increase (decrease) in:                                                    |  |                          |           
|Accounts payable                                                           |  |                          | 459,970   
|Accounts payable - related party                                           |  |                          |           
|Due to former officer                                                      |  |                          | (196,912  
|Accrued officer/consulting salaries                                        |  |                          | (57,070   
|Accrued payroll taxes                                                      |  |                          | 92,289    
|Accrued liabilities                                                        |  |                          | 36,679    
|Settlements and judgments                                                  |  |                          | 496,519   
|Deferred rent                                                              |  |                          | -         
|Accrued interest                                                           |  |                          | (172,889  
|Employee severance                                                         |  |                          | -         
|NET CASH USED IN OPERATING ACTIVITIES                                      |  |                          | (3,022,426
|                                                                           |  |                          |           
|CASH FLOWS FROM INVESTING ACTIVITIES                                       |  |                          |           
|Equipment purchases                                                        |  |                          | (79,574   
|NET CASH USED BY INVESTING ACTIVITIES                                      |  |                          | (79,574   
|                                                                           |  |                          |           
|CASH FLOWS FROM FINANCING ACTIVITIES                                       |  |                          |           
|Bank overdraft                                                             |  |                          | (6,975    
|Proceeds from notes payable - others                                       |  |                          | -         
|Placement fees paid                                                        |  |                          | (85,000   
|Proceeds from sale of common stock                                         |  |                          | 3,204,955 
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                  |  |                          | 3,112,980 
|                                                                           |  |                          |           
|Increase in cash and cash equivalents                                      |  |                          | 10,980    
|Cash at beginning of period                                                |  |                          | 2,396     
|CASH AT END OF PERIOD                                                      |  | $                        | 13,376    
|                                                                           |  |                          |           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                          |  |                          |           
|Interest                                                                   |  | $                        | -         
|Income Taxes                                                               |  | $                        | -         
|                                                                           |  |                          |           
|NON CASH INVESTING AND FINANCING ACTIVITIES:                               |  |                          |           
|Common stock issued for placement fees                                     |  | $                        | 43,053    
|Accrual of placement fees                                                  |  | $                        | 54,372    
|Common stock issued for services                                           |  | $                        | 187,894   
|Conversion of debt for shares of common stock                              |  | $                        | 180,682   





See accompanying notes to the consolidated financial statements and the reports of the independent registered
public accounting firms.



F-4







NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



1.  ORGANIZATION, BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Organization and Nature of Operations





All American Pet Company, Inc. (“AAPT”
or the “Company”) is a developer and marketer of innovative pet wellness products including super-premium dog foods
and antibacterial wipes. In 2010 and 2011, AAPT produced, marketed, and sold two super-premium dog foods under the brand names
Grrr-nola® Natural Dog Food and Chompions®. Both Grrr-nola® Natural Dog Food and Chompions® were the first dog
food products that were formulated for canine heart health and endorsed by a veterinary cardiac surgeon. In 2012, the Company launched
its line of PawtizerTM pet wipes and spray, the pet care industry’s first alcohol-free anti-bacterial dog cleaner. The
Company has also announced and is marketing its MuttTM Great Food for Great Dogs super-premium dry kibble dog food, and its
Nutra BarsTM line of portable, convenient and functional, super-premium 4 ounce dog food bars. Each 4 ounce bar has a kcal
equivalent of 8 ounces of super-premium dry dog food.



All American Pet Company, Inc. was initially
organized under the laws of the State of New York (“All American Pet Company, Inc. NY”) in February 2003. In January
2006, All American Pet Company, Inc. NY merged into All American Pet Company, Inc. a Maryland corporation (“All American
Pet Company, Inc. MD”). In June 2012, All America Pet Company Inc. merged into a Nevada Corporation, (“All American
Pet Company, Inc.”). The Company has formed a number of wholly owned subsidiaries to provide for accountability of each of
its operations. All American PetCo, Inc. was formed in January 2008 to provide corporate infrastructure and management services.
All American Pet Brands, Inc. was formed in April 2009 to be the Company’s manufacturing and warehousing operation. In September
2009, the Company signed a license and distribution agreement with AAP Sales and Distribution Inc. a third party company that obtained
the rights to manufacture and sell certain of the Company’s products on a non-exclusive basis. AAP Sales and Distribution,
Inc.’s operations have been consolidated with All American Pet Company, Inc. based on accounting guidelines for Variable
Interest Entities.



Unless the context otherwise requires,
references in these financial statements to the “Company” or “AAPT” refer to All American Pet Company,
Inc., a Nevada corporation, and its subsidiaries, and its predecessors, All-American Pet Company Inc., MD, a Maryland Corporation
and All-American Pet Company Inc., NY, a New York corporation. All financial statements give effect to this reincorporation
as if it occurred at the beginning of the period.



Basis of Presentation





The accompanying consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern. As described below, the Company has incurred
consistent losses, limited liquid assets, significant pas due debts, and has a stockholders' deficit. These conditions, among
others, raise substantial doubt as to the Company's ability to continue as a going concern. These consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty. These consolidated
financial statements do not include any adjustments relating to the recoverability and classification of recorded asset
amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a
going concern. The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in
accordance with accounting principles generally accepted in the United States.



F-5









Going Concern and Management’s Plans





These financial statements have been prepared
in accordance with generally accepted accounting principles applicable to a going concern which contemplates the realization of
assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has a limited operating
history and limited funds. As shown in the consolidated financial statements, the Company incurred a net loss of $3,006,767, used
$3,022,426 cash for operations in for the year ended December 31, 2012, had a working capital deficit of $4,456,477 and total stockholders’
deficit of $4,571,339 as of December 31, 2012. In addition, the Company has limited liquid assets, significant past due debts,
including unpaid payroll taxes, and minimal revenues. These factors raise substantial doubt about the Company’s ability to
continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from
the outcome of this uncertainty.





The Company is dependent upon outside financing
to continue operations. Management plans to raise funds via private placements of its common stock and/or the issuance off debt
instruments to satisfy the capital requirements of the Company’s business plan.  There is no assurance that the
Company will be able to obtain the necessary funds through continuing equity and debt financing to have sufficient operating capital
to execute the Company's business plan. If the Company is able to obtain necessary funds, there is no assurance that the Company
will successfully implement its business plan or raise sufficient capital to complete the execution of its business plan. The Company’s
continuation as a going concern is dependent on the Company’s ability to raise additional funds through a private placement
of its equity or debt securities or other borrowings sufficient to meet its obligations on a timely basis and ultimately to attain
profitable operations.



Significant Accounting Policies



Principles of Consolidation



The consolidated financial statements include the accounts of All American Pet Company, Inc. (a Nevada
corporation), and its wholly-owned subsidiaries All American PetCo, Inc. (a Nevada corporation), All American Pet Brands, Inc.
(a Nevada corporation) and AAP Sales and Distribution, Inc. (a Nevada corporation).  AAP Sales and Distribution, Inc.
is considered a variable interest entity.  All significant inter-company balances and transactions have been eliminated.  All
American Pet Company, Inc., All American PetCo, Inc., All American Pet Brands, Inc., and AAP Sales and Distribution Inc., will
be collectively referred to herein as the “Company”.



F-6









The consolidated financial statements include
the accounts of the Company and AAP Sales and Distribution, Inc., a variable interest entity ("VIE") for which the Company
is the primary beneficiary.  Effective January 1, 2010, the Company adopted the accounting standards for non-controlling
interests and reclassified the equity attributable to its non-controlling interests as a component of equity in the accompanying
consolidated balance sheets. All significant intercompany balances and transactions have been eliminated in consolidation.



Critical Accounting Policies/Estimates



Use of Estimates



The preparation of consolidated 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 liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could materially differ from those estimates. Management believes that the estimates used are reasonable. Significant estimates
made by management include estimates for bad debts, excess and obsolete inventory, and other trade spending liabilities.



Revenue Recognition, Sales Incentives and Slotting Fees



Revenues are recognized upon passage of
title to the customer, typically upon product pick-up, shipment or delivery to customers.  The Company’s revenue
arrangements with its customers may include sales incentives and other promotional costs such as coupons, volume-based discounts,
slotting fees and off-invoice discounts.  These costs are typically referred to collectively as “trade spending”.
Pursuant to Accounting Standards Codification (“ASC”) Topic 605, these costs are recorded when revenue is recognized
and are generally classified as a reduction of revenue. Slotting fees refer to arrangements pursuant to which the retail grocer
allows our products to be placed on the store’s shelves in exchange for a slotting fee. Given that there are no written contractual
commitments requiring the retail grocers to allocate shelf space for twelve months, we expense the slotting fee at the time orders
are first shipped to customers.



Stock-based compensation



The Company records stock based compensation
in accordance with the guidance in ASC Topic 718, which requires the Company to recognize expenses related to the fair value of
its employee stock option awards.  This eliminates accounting for share-based compensation transactions using the intrinsic
value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the
cost of all share-based awards on a graded vesting basis over the vesting period of the award.



Transactions with non-employees in which goods or services are the consideration received for the issuance
of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument
issued, whichever is more reliably measurable. The measurement date off the fair value of the equity instrument issued is the
earlier of the date on which the counterparty’s performance is complete or the date on which it is probable that performance
will occur.



F-7







Earnings (Loss) Per Share



Net loss per share is calculated using
the weighted average number of common stock outstanding for the period and diluted loss per share is computed using the weighted
average number of common stock and dilutive common equivalent stock outstanding.  The weighted average number of common
stock outstanding was 472,237,035 and 233,288,191 for the year ended December 31, 2012 and 2011, respectively. Net loss per share
and diluted net loss per share are the same for all periods presented.



Fair Value of Financial Instruments



ASC 820, Fair Value Measurements and
Disclosures, requires disclosing fair value to the extent practicable for financial instruments that are recognized or unrecognized
in the balance sheet. Fair value of financial instruments is the amount at which the instruments could be exchanged in a current
transaction between willing parties. The Company considers the carrying amounts of cash, accounts receivable, related party and
other receivables, accounts payable, notes payable, related party and other payables, to approximate their fair values because
of the short period of time between the origination of such instruments and their expected realization.



ASC 820 prioritizes the inputs used
in measuring fair value into the following hierarchy:



Level 1Quoted market
prices in active markets for identical assets or liabilities.



Level 2Observable
inputs other than those included in Level 1 (for example, quoted prices for similar assets in active markets or quoted prices for
identical assets in inactive markets).



Level 3Unobservable
inputs reflecting management’s own assumptions about the inputs used in estimating the value off the asset or liability.



The Company has no financial instruments measured at fair
value on a recurring or nonrecurring basis as of December 31, 2012 or 2011.



Cash Equivalents



Cash equivalents consist of highly liquid investments with maturities at the date of purchase of 90 days
or less.





F-8









Accounts Receivable and Allowances for Uncollectible Accounts



Credit limits are established through a
process of reviewing the financial history and stability of each customer. The Company regularly evaluates the collectability of
the trade receivable balances by monitoring past due balances. If it is determined that a customer will be unable to meet its financial
obligation, the Company records a specific reserve for bad debts to reduce the related receivable to the amount that is expected
to be recovered.



Inventories



Inventories consist of raw materials, packaging
supplies and finished goods and are valued at the lower of cost, determined on a first-in, first-out (“FIFO”) basis,
or market.



Machinery, Equipment and Leasehold Improvements



Machinery and equipment are stated at cost.
Significant improvements are capitalized and maintenance and repairs are expensed. Depreciation and amortization are provided using
the straight-line method over the estimated useful lives of the assets.  Machinery and equipment are reviewed for impairment
whenever events or circumstances indicate that the carrying amount of assets may not be recoverable.  The Company evaluates
recoverability of property, plant and equipment to be held and used by comparing the carrying amount of the asset to estimated
future net undiscounted cash flows to be generated by the asset. If such assets are considered to be impaired, the impairment to
be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.



Estimated useful lives are as follows:



Computer equipment 3 – 5 years



Furniture and fixtures 5 – 10 years



Warehouse equipment 5 – 10 years



Income Taxes



The Company accounts for income taxes under
the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements.  Under this method, deferred tax assets and
liabilities are determined based on differences between financial statements and tax basis of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to reverse.  The effect of a change in tax rates
on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.





F-9









The
Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be
realized.  In making such determination, the Company considers all available positive and negative evidence,
including future reversals of existing taxable temporary differences, projected future taxable income, tax planning
strategies and recent financial operations.  A valuation allowance is established against deferred tax assets that
do not meet the criteria for recognition.As of December 31, 2012 and 2011, the Company’s only
significant deferred tax asset is its net operating loss carryforwards. Based on the Company’s recurring losses and
financial position, the net deferred tax assets (approximately $6.5 million as of December 31, 2012) have been fully reserved
for as of December 31, 2012 and 2011. Net operating losses begin to expire in 2022 for Federal purposes and 2014 for
state purposes. The U.S. tax laws contain provisions (Section 382 limitations) that limit the annual utilization of net
operating loss (and credit carryforwards) upon the occurrence of certain events including a significant change in ownership
interest. Generally, such limitations arise when the ownership of certain shareholders or public groups in the stock of a
corporation change by more than 50 percentage points over a three-year period. The Company may have incurred such an event or
events; however, the Company has not completed a current study to determine the extent of the limitations, if any. Until a
study is completed and the extent of the limitations is able to be determined, no amounts are being presented as an uncertain
tax position.







A tax benefit
from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination,
including resolutions of any related appeals or litigation processes, based on the technical merits.  Income tax provisions
must meet a more-likely-than-not recognition threshold at the effective date to be recognized initially and in subsequent periods.The Company has no unrecognized tax benefits as of December 31, 2012 and 2011. Given that the Company’s net operating
losses have yet to be utilized, all previous tax years remain open to examination by Federal authorities and other jurisdictions
in which the Company operates.



Reclassifications



Certain amounts in the consolidated balance
sheet as of December 31, 2011 have been reclassified to be consistent with the current year presentation. The reclassification
had no impact on the Company’s consolidated financial condition, results of operations or cash flows.



Recent Accounting Pronouncements Adopted



On January 1, 2012, the Company adopted
Accounting Standards Update No. 2011-05, “Presentation of Comprehensive Income” that improves the comparability, consistency,
and transparency of financial reporting and increases the prominence of items reported in other comprehensive income. The amendments
in this standard require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement
of comprehensive income or in two separate but consecutive statements. The update did not impact the Company’s consolidated
financial statements, as the Company did not have any items of comprehensive income in 2012 or 2011.



2. VARIABLE INTEREST ENTITY



The following is a description of the Company’s
financial interests in a variable interest entity that management considers significant, those for which management has determined
that the Company is the primary beneficiary of the entity and, therefore, has consolidated the entity into the Company’s
financial statements.





On August 12, 2009, we entered into a License
Agreement with AAP Sales and Distribution, Inc. (“AAPSD”). Under the terms of the agreement, AAPSD has the non-exclusive
right to manufacture and market certain products of the Company (“AAPT”). The duration of the agreement is for a period
of five years.  AAPSD is the primary beneficiary of the Company because management of AAPT controls the economic resources
of AAPSD and provides significant financial support to AAPSD in the form of the production and distribution and deferred payment
arrangements between AAPSD the Company.



AAPSD owes the Company payments for
product purchased and for royalties at the stated rate of 18.5% of net revenues, which are due and payable within five
business days of receipt of funds by AAPSD from any sale when good funds are received from the sale.  The 18.5%
royalty payments will be applied to all minimum guarantee payments. The minimum guaranteed royalties, as amended, are due
based within the 12-month period following the time at which AAPT has delivered 3,000,000 pounds of finished
product.  AAPSD does not owe the Company any royalties until AAPSD has recouped any costs of marketing or placement
fees. All royalty payments due from sales are accumulated and are applied toward to the minimum royalty payment for the
year.  If the 18.5% royalties are less than the minimum then AAPSD is obligated pay AAPT the difference between
what was paid during the 12 month period and the required minimum.  Minimum royalty payments are due in the normal
course of business as AAPSD has ten days at the end of each quarter to report any sales and royalties due and AAPC has the
right to review the reports and agree on what amounts are owed based on sales and a statement of any minimum guarantees that
may be due and payable.  All payments are to be made in the normal course of business as agreed at the time of the
annual royalty report’s acceptance by AAPT.



F-10









Management has determined that AAPT is
the primary beneficiary of AAPSD as the Company’s interest in the entity is subject to variability based on results from
operations and changes in the fair value. During the year ended December 31, 2012 and 2011, all operations of AAPSD are included
in the accompanying consolidated financial statements. For the years ended December 31, 2012 and 2011, sales of $24,701 and ($82,153),
respectively, and net losses of ($210,486) and ($151,031), respectively, were recognized as a result of the consolidation.





The financial position of AAPSD at December 31, 2012 is as follows:







|Total Assets                |  | $ | 715,869    |  
|--------------------------- |  | - | ---------- | -
|Total Liabilities           |  |   | (1,274,735 | )
|Total Stockholders’ Deficit |  | $ | 558,866    |  







3. INVENTORY



Inventory consists of the following:



|                |  | December 31, 2012 |         |  | December 31, 2011 |  
|--------------- |  | ----------------- | ------- |  | ----------------- | -
|Raw materials   |  | $                 | -       |  |                   | $
|Work in process |  |                   | -       |  |                   |  
|Finished goods  |  |                   | 715,869 |  |                   |  
|                |  | $                 | 715,869 |  |                   | $



During the year
ended December 31, 2011, the Company vacated the warehouse and manufacturing facility in Nebraska City, Nebraska. Upon vacating
of the facility, the Company discarded the on hand product inventory as the Company had determined that the cost to store and or
sell the remaining inventory exceeded the net proceeds that could be realized from an orderly disposal of this inventory. The transaction
resulted in an impairment charge of $98,164 in the year ended December 30, 2011.There was no impairment charge against
inventory during the year ended December 31, 2012, and the reserve for inventory obsolescence was $0 as of December 31, 2012 and
2011.





F-11







4. MACHINERY AND EQUIPMENT



Machinery
and equipment consists of the following:





|                                        |  | December 31, 2012 |        |   | December 31, 2011 |  
|--------------------------------------- |  | ----------------- | ------ | - | ----------------- | -
|Computer equipment and software         |  | $                 | 2,769  |   |                   | $
|Furniture and Fixtures                  |  |                   | 1,991  |   |                   |  
|Warehouse and food production equipment |  |                   | 73,562 |   |                   |  
|Total                                   |  |                   | 78,322 |   |                   |  
|Less: Accumulated depreciation          |  |                   | (8,956 | ) |                   |  
|Net Property and Equipment              |  | $                 | 69,366 |   |                   | $





During the year ended December 31, 2011,
the Company cancelled a capital lease of a bar forming machine and returned the equipment to the lessor. The transaction resulted
in a reduction of warehouse equipment of $122,450 to $0 and the Company recognized a loss on abandonment of machinery and equipment
of $7,812.





In 2012,
obsolete and fully depreciated computer equipment in the amount of $27,095 was scrapped. Depreciation expense for the years
ended December 31, 2012 and 2011 was $12,750 and $915, respectively.



5. PAYROLL TAXES





The Company did not make certain required
filings and payments of required federal and state payroll taxes. The Company has provided an estimate of penalty assessments and
interest.   The collective amount of payroll taxes, interest and penalties due at December 31, 2012 and 2011 totaled
$889,711 and $797,422, respectively. Under the Internal Revenue Code, the Internal Revenue Service may impose a civil penalty on
the Company’s responsible persons that is distinct from the Company’s responsibilities. This civil penalty may equal
100% of the Company’s delinquent trust fund taxes.



F-12







6.  NOTES PAYABLE



Notes payable consists of the following:



|                                                                                                                                                     |  | December 31, |        |  | December 31, |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ |  | ------------ | -
|                                                                                                                                                     |  | 2012         |        |  | 2011         |  
|Notes Payable – Interest at 10% per annum; interest and principal due on demand                                                                      |  | $            | -      |  |              | $
|Notes Payable interest at 17% per annum; interest and principal due on demand; demand has been made and the  note is in default at December 31, 2012 |  |              | 50,000 |  |              |  
|Convertible 8% Note Payable due September 8, 2011                                                                                                    |  |              | -      |  |              |  
|Convertible 8% Note Payable due November 14, 2011                                                                                                    |  |              | -      |  |              |  
|Total Notes Payable                                                                                                                                  |  | $            | 50,000 |  |              | $







On April 27, 2004, the Company entered
into an unsecured promissory note with an unrelated third party for $150,000. The loan bears interest at 10% per annum and had
an original due date of April 27, 2005. Extended due dates were granted up through 2011. On August 9, 2012, a stipulated settlement
amount of $300,000, which included principal of $150,000 and accrued interest of $150,000, was reached with the noteholder. As
a result of the stipulated settlement, the related $300,000 has been classified in settlements and judgments at December 31, 2012
in the accompanying consolidated balance sheet (Note 9).



In 2010, the Company entered into an unsecured promissory note with an unrelated third party for $50,000.
The loan bears interest at 17% and is due on demand. On March 16, 2012, the noteholder demanded repayment of the note and all accrued
interest. The Company has not made any payments and is in default on the note.





On June 15,
2010, the Company entered into an unsecured, convertible promissory note with an unrelated third party for $30,000.  The
loan bears interest at 8% per annum and a balloon payment of principal and accrued interest is due on March 17, 2011.  At
any time 180 days after the date of the note, the lender can convert the principal and accrued interest into shares of the Company’s
common stock at a 45% discount based on the average of the lowest three trading prices during a ten day period ending one day
prior to the conversion date.  On January 3, 2011, $10,000 of the principal balance was converted into 1,098,901 shares.
On January 13, 2011, $10,000 of the principal balance was converted into 1,162,791 shares. On January 19, 2011, $10,000 of the
remaining principal balance and $1,200 in interest was converted into 1,454,545 shares and the note was deemed paid in full.



F-13







On August 27, 2010, the Company entered
into an unsecured, convertible promissory note with an unrelated third party for $30,000.  The loan bears interest at
8% per annum and a balloon payment of principal and accrued interest is due on May 31, 2011.  At any time 180 days after
the date of the note, the lender can convert the principal and accrued interest into shares of the Company’s common stock
at a 45% discount based on the average of the lowest three trading prices during a ten day period ending one day prior to the conversion
date.  On March 8, 2011, $10,000 of the principal balance was converted into 1,639,344 shares. On March 22, 2011, $15,000
of the principal balance was converted into 4,285,714 shares. On June 23, 2011, the Company received a default notice from the
holder of the note. The default notice was issued in regards to the Company’s failure to maintain current Securities Exchange
Commission filings. The noteholder demanded accelerated payments and default interest rates as a result of this default. On September
8, 2011, the remaining $5,000 principal balance and $1,200 in interest of the 8% note dated August 27, 2010 and due May 31, 2011,
was converted into 3,100,000 shares of common stock and the note was deemed paid in full.



On December
6, 2010, the Company entered into an unsecured, convertible promissory note with an unrelated third party for $37,500.  The
loan bears interest at 8% per annum and a balloon payment of principal and accrued interest is due on September 8, 2011.  At
any time 180 days after the date of the note, the lender can convert the principal and accrued interest into shares of the Company’s
common stock at a 40% discount based on the average of the lowest three trading prices during a ten day period ending one day prior
to the conversion date.  On June 23, 2011, the Company received a default notice from the holder of the note. The default
notice was issued in regards to the Company’s failure to maintain current Securities Exchange Commission filings. The noteholder
demanded accelerated payments and default interest rates as a result of this default. The Company did not repay or convert any
of this convertible debt into common stock in the year ended December 31, 2011. During 2012, $64,000, consisting of accrued interest
and the outstanding principal balance was converted into 56,321,448 shares of common stock
and the note was deemed paid in full.



On February 11, 2011, the Company entered
into an unsecured, convertible promissory note with an unrelated third party for $75,000, less a $3,000 fee. The loan bears
interest at 8% per annum and a balloon payment of principal and accrued interest is due on November 14, 2011.  At any
time 180 days after the date of the note, the lender can convert the principal and accrued interest into shares of the Company’s
common stock at a 40% discount based on the average of the lowest three trading prices during a ten day period ending one day prior
to the conversion date.  On June 23, 2011, the Company received a default notice from the holder of the note. The default
notice was issued in regards to the Company’s failure to maintain current Securities Exchange Commission filings. The noteholder
demanded accelerated payments and default interest rates as a result of this default. The Company did not repay or convert any
of this convertible debt into common stock in the year ended December 31, 2011. During 2012, $128,000, consisting of accrued interest
and the outstanding principal balance, was converted into 76,856,713 shares of common stock and the note was deemed paid in full.





F-14







7. RELATED PARTY TRANSACTIONS



As of December
31, 2011, the Company owed a total of $47,446 to the officers of the Company for accrued salaries which was paid in 2012.







On March 6, 2012, the Board of Directors,
consisting of Mr. Schwartz and Ms. Bershan, authorized the Company to execute a Convertible Revolving Grid Note (the “Grid
Note”) for a principal sum of up to $1,000,000 with CEO Barry Schwartz and President, Lisa Bershan. The Grid Note bears interest
at 10% per year and may be converted into common stock of the Company at a conversion price of $0.0022 any time before March 6,
2013. Neither Mr. Schwartz nor Ms. Bershan has advanced capital under the terms of the grid note as of December 31, 2012. In March
2013, the Grid Note was amended (Note 12).





On April 30, 2012, the Board of Directors
approved salary advances not to exceed $250,000 for Mr. Schwartz and Ms. Bershan. In 2012, the Board of Directors required that
all salary advances are repaid in full before any transactions pursuant to the Grid Note are consummated. As of December 31, 2012,
there were no outstanding salary advances, as all amounts received by Mr. Schwartz and Ms. Bershan were deemed to be, in substance,
officer compensation.



During the year ended December 31, 2012,
the Company made advances to, and received advances from, an entity owned by the Company’s Chief Executive Officer. These
advances are not collateralized and do not bear interest. As of December 31, 2012, no amounts are due from and no amounts are due
to this related entity.







8. STOCKHOLDERS’ DEFICIT



Capital Stock



All American
Pet Company, Inc. was formed under Maryland law on January 4, 2006 with 50,000,000 authorized shares of common stock and 10,000,000
authorized shares of preferred stock. On January 27, 2006, All-American Pet Company Inc., a New York corporation, merged with
and into All American Pet Company, Inc., a Maryland corporation. In June 2012, All-American Pet Company Inc., Maryland, merged
with and into All American Pet Company, Inc., a Nevada corporation.



Increase in Authorized Common
Stock





Concurrent with the June 11, 2012 re-domicile
to a Nevada corporation, the shareholders voted to increase the number of authorized shares of $0.001 par value common stock to
1,010,000,000. Previously, the shareholders voted on February 26, 2011 to increase the number of authorized shares of $0.001 par
value common stock to 500,000,000. Authorized shares had been increased from 50,000,000 to 250,000,000 in 2009.



In 2013, the Board of Directors increased
the number of authorized shares to 3,000,000,000 (Note 12).



Sales of Common Stock







During the year ended December 31, 2012,
the Company received and accepted subscriptions for 285,544,000 shares of common stock at $0.01 per share. The sale of unregistered
equity securities resulted in a capital increase of $3,012,441, after offering costs. The Company recorded a $677,156 common stock
payable on its books at December 31, 2012 to reflect the value of the 77,598,571 of common shares not yet issued, but for which
cash has been received and $187,894 of common stock earned by various consultants during the year ended December 31, 2012. As of
December 31, 2012, there were 695,494,866 shares issued and outstanding.





F-15







Conversion of Preferred Stock
to Common Stock



On February 27, 2009, the Company entered
into an agreement with the two preferred stockholders to convert all 56,500 shares of Series “A” Preferred shares
held by them in exchange for 5,000,000 shares of the Company’s common stock (the “Share Guarantee”).  The
delivery of the common stock to the preferred stockholders took place in March 2009 and the Company was released by the stockholders
from any and all future claims and liabilities. The preferred stockholders have the right to sell the common stock at a rate of
1,250,000 in the aggregate every 90 days starting May 15, 2009 and the right to sell at will after March 31, 2010. The Company
has agreed that the total value of the shares sold over the Liquidation Period, which is defined as the period from May 15, 2009
to April 30, 2010, to be at a minimum of $800,000 or the market value of 5,000,000 shares at $0.16 per share. If the value of
the shares sold during the Liquidation Period is less than $800,000, then the Company will have the right to purchase any unsold
shares at a price of $0.16 per share. If the gross proceeds from all sales is still less than $800,000 then the Company shall
have the right and not the obligation to make up the difference by making a cash payment on or before May 31, 2010.  In
addition, no later than June 15, 2010, the Company is obligated to issue an additional 3,000,000 shares of the common stock in
total to these stockholders if the sales proceeds and any additional payments made by the Company is less than $800,000.



The Share Guarantee was subsequently amended
to extend the Liquidation Period described above to March 31, 2011 and those amendments required the Company to issue 6,000,000
shares of common stock with a fair value of $400,000 in 2010. In connection with the Share Guarantee, the Company recognized an
additional expense, and a corresponding accrued liability, of $600,000 in 2010.



In October 2012, the Share Guarantee was
amended, subject to the Company’s ability to satisfy certain required payments and other conditions. As the Company did not
satisfy its contractual obligations, the amendment was cancelled and became null and void.





Although the Company’s contractual
obligations under the Share Guarantee terminated in 2011, management intends to fulfill the Company’s obligations under the
related agreements and amendments.  Based on the $800,000 amount of the guarantee, amounts realized by the counterparties
from selling related shares, and the number of shares the counterparties have left to sell, management estimates the Company’s
obligation under the Share Guarantee to be $400,000 as of December 31, 2012.



Warrants Outstanding



A summary of the Company’s outstanding
warrants and activity for each of the years ended December 31, 2012 and 2011 is as follows:





|                                 |  | Number of  Units |            |   | Weighted-  Average  Exercise  Price  Per Share |  
|-------------------------------- |  | ---------------- | ---------- | - | ---------------------------------------------- | -
|                                 |  |                  |            |   |                                                |  
|Outstanding at December 31, 2010 |  |                  | 6,800,000  |   |                                                | $
|Expired in 2011                  |  |                  | (1,800,000 | ) |                                                |  
|Outstanding at December 31, 2011 |  |                  | 5,000,000  |   |                                                |  
|Issued                           |  |                  | -          |   |                                                |  
|Exercised                        |  |                  | -          |   |                                                |  
|Outstanding at December 31, 2012 |  |                  | 5,000,000  |   |                                                | $





F-16







Pursuant to August 24, 2008 Employment
Agreements, both Barry Schwartz and Lisa Bershan, officers of the Company, are entitled to receive 2,500,000 warrants each at an
exercise price of $0.17 per share as bonus. A Black Scholes calculation determined the value of the warrants was $118,750 of bonus
to each officer, which was recognized as compensation expense in 2008. The Black Scholes calculation takes into consideration the
following assumptions: 5,000,000 as number of shares, a stock price of $0.05, an exercise price of $0.17, volatility
rate of 409.67% discount rate of 3.875%, immediate vesting period and a term of ten years.





Common Stock Receivable





On April 6, 2010, the Company settled litigation
with a former employee. Terms of the settlement required the former employee to place 400,000 shares of Company common stock valued
at $52,000 in an escrow account in exchange for an initial payment of $8,000 and 27 monthly payments of $1,571. The Company will
receive the shares of common stock after all of the payments have been made. The Company made no payments in 2012 or 2011 related
to this arrangement (Note 9).



On February 3, 2011, through mediation,
the Company settled litigation with a former employee. Terms of the settlement required the former employee to place 750,000 shares
of Company stock valued at $90,000 in an escrow account in exchange for 14 monthly payments of $6,576. The Company will receive
the shares of common stock after all of the payments have been made. The Company made no payments in 2012 and $2,069 in 2011 (Note
9).



9. LITIGATION, CLAIMS, AND JUDGMENTS



The Company is involved in various litigation,
claims and judgments involving vendors, former employees, and a promissory noteholder. A summary is as follows:





|                          |  | December
    31, |         |  | December
    31, |  
|------------------------- |  | ---------------- | ------- |  | ---------------- | -
|                          |  | 2012             |         |  | 2011             |  
|                          |  |                  |         |  |                  |  
|Vendors                   |  | $                | 382,473 |  |                  | $
|                          |  |                  |         |  |                  |  
|Former
    Employees      |  |                  | 268,245 |  |                  |  
|                          |  |                  |         |  |                  |  
|Promissory
    Noteholder |  |                  | 227,281 |  |                  |  
|                          |  |                  |         |  |                  |  
|                          |  | $                | 877,999 |  |                  | $



F-17









Vendors



As of December 31, 2011, one vendor had
a settlement agreement for $20,000. During 2012, six vendors made claims or were awarded judgments against the Company for a total
of $364,473, and aggregate payments of $2,000 were made. The balance outstanding at December 31, 2012, was $382,473.



On July 23, 2012, a vendor filed an action
against the Company and certain officers as individuals for an original $150,000 judgment previously awarded in arbitration, 4.75%
interest, legal fees of $49,950, and other fees of $4,981. The action has not been heard by a court.





As of December 31, 2012, the Company has
accrued $221,463 relating to this matter.



Former Employees



As of December 31, 2011, six former employees
made claims or were awarded judgments against the Company for a total of $211,480. During 2012, one former employee entered into
a settlement agreement for $50,000, and there were no payments made in 2012. The balance outstanding at December 31, 2012 was $268,245,
and includes accrued interest.



As described in Note 8, the Company has
settlement agreements with two former employees that require monthly cash payments and provide for the return of 1,150,000 shares
of common stock if the Company satisfies its payment obligations to the former employees.



Promissory Noteholder



On August 9, 2012, the Company settled
litigation with a note holder. The settlement requires the Company to pay cash of $300,000 and interest at 8% per annum. Terms
of the settlement require an initial payment of $50,000 and quarterly payments of $30,000 beginning October 1, 2012. Total payments
during 2012 were $80,000. The outstanding principal balance and accrued interest as of December 31, 2012, was $227,281.



In the event of default, the noteholder
can enter a stipulated judgment against the Company and certain officers as individuals in the amount of $1,197,190. The Company
has not made the required January 1, 2013 or April 1, 2013 payments and the noteholder has not filed the stipulated judgment against
the Company.





F-18







10. CUTEST DOG COMPETITION



In May 2009,
the Company finalized plans to host a nationwide viral marketing contest known as the “Cutest Dog Competition”. The
contest started on August 1, 2009, allowing every dog owner in America to have the opportunity to submit a picture of their dog.
The Company announced the winner of the “Cutest Dog Competition” on its website as well as at a major venue on Thanksgiving
Day. Prizes were distributed for regional winners, and three top regional winners received a $5,000 prize each, qualified as finalists
for the final event.  Regional winners from all over the country then competed for the title of the “Cutest Dog
Competition” and that winner was awarded the $1 million prize. In November 2009, the winner was announced.





The present value of the $1,000,000 obligation
payable over 30 years at 7.5% present value is $336,500.  The discount of $663,500 is being amortized over 30 years with
an annual cash payment of $33,333.  The Company did not make any payments in the years ended December 31, 2012 and 2011.
As of December 31, 2012 and 2011, $402,849 and $378,533, respectively were recorded as prize liabilities in the accompanying consolidated
balance sheets.



11. COMMITMENTS AND CONTINGENCIES



Lease commitments



In the normal course of business, the Company
enters into a number of off-balance sheet commitments. These commitments expose the Company to varying degrees of credit and market
risk and are subject to the same credit and market risk limitation reviews as those recorded on the Company’s consolidated
balance sheets. The Company leases space for its manufacturing operations in Shawnee, Kansas and leases equipment used in operations
at that location. Amounts of minimum future annual commitments under non-cancelable operating leases are as follows:







|2013                |  | $ | 167,599 |  | 
|------------------- |  | - | ------- |  | 
|2014                |  |   | 150,327 |  | 
|2015                |  |   | 106,029 |  | 
|2016                |  |   | 108,022 |  | 
|2017 and thereafter |  |   | 45,305  |  | 
|Total               |  | $ | 577,282 |  | 





In addition to these commitments, the Company
pays monthly rent for its corporate offices and rent for a warehouse forklift, both on month to month basis, totaling $6,395 per
month.





Litigation



In addition to the matters described in
Note 9, from time to time, the Company is involved in litigation arising in the normal course of business. Management believes
that resolution of these other matters will not result in any payment that, in the aggregate, would be material to the Company’s
consolidated financial position or results of operations.



F-19









12. SUBSEQUENT
EVENTS



On January 30, 2013, the Board of Directors
approved a private placement offering of up to 200,000,000 shares of common stock at $0.01 per share.  This offering expired
on February 28, 2013. On March 1, 2013, the Board of Directors approved a private placement offering of up to 285,714,000 shares
of common stock at $0.007 per share.



On February 26, 2013, the Board of Directors
authorized the Company to amend the Convertible Revolving Grid Note (Note 7) for a principal sum of up to $1,000,000 with Chief
Executive Officer Barry Schwartz and President, Lisa Bershan dated March 6, 2012. The amendment reduced interest to 6.5% per year,
extended the maturity date to 4 years, and extended the conversion date to October 31, 2013. As of June 14, 2013, Mr. Schwartz
and Ms. Bershan have loaned $521,000 under the terms of the Grid Note and such amount is convertible into 236,818,181 shares of
the Company’s common stock.



On February 12, 2013, the Company entered
into an unsecured, convertible promissory note with an unrelated third party for $103,500, less a $3,500 fee.  The loan bears
interest at 8% per annum and a balloon payment of principal and accrued interest is due on November 12, 2013.  At any
time 180 days after the date of the note, the lender can convert the principal and accrued interest into shares of the Company’s
common stock at a 39% discount based on the average of the lowest three trading prices during a ten day period ending one day prior
to the conversion date.





In June 2013, the Board of Directors voted
to increase authorized shares from 1 billion and 10 million to 3 billion shares. As of June 14, 2013, there were 837,929,245 shares
of common stock issued and outstanding.



During the period from January 1, 2013
to June 14, 2013, the Company received and accepted subscriptions for 2,500,000 shares of common stock at $0.02 per share and 93,455,771
shares of common stock at $0.007 per share. Proceeds from the sales of equity securities aggregated $704,190, less before offering
costs.



On January 18, 2013, All American Pet Company,
 Inc. (the “Company”) filed an action entitled All American Pet Company, Inc. vs. Eric Grushkin et al, in the
Superior Court of the State of California, County of Los Angeles, West District against defendant Eric Grushkin (Case Number: SC119776).
 As previously announced, on January 11, 2013,  the Company was made aware that a former employee sent communications
that contained intentionally misleading and harmful disclosures as well as confidential information regarding the Company to a
selected group of shareholders. These communications included allegations that the Company’s chief executive officer and
president engaged in acts of malfeasance, misfeasance and negligence in the management and conduct of the Company business. The
Company believes that this employee made multiple unauthorized disclosures of confidential information and misinformation to these
shareholders on January 10, 2013 and thereafter. The complaint seeks damages and injunctive relief for:



| | 1. | breach of contract
| | -- | ------------------



| | 2. | misappropriation of trade secrets
| | -- | ---------------------------------



| | 3. | intentional interference with prospective economic advantage
| | -- | ------------------------------------------------------------



| | 4. | breach of fiduciary duty
| | -- | ------------------------



| | 5. | violation of computer fraud and abuse act, and
| | -- | ----------------------------------------------



| | 6. | conversion
| | -- | ----------



Motions made by the defendant to remove to U.S. District Court and then to Dismiss have been denied. Other
motions by the defendant have also been denied. This matter is currently pending in California State Court.





F-20