**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549








**FORM
      10-QSB**





QUARTERLY
      REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934







FOR
      THE
      QUARTERLY PERIOD ENDED**JUNE 30, 2007**








**000-50526**


(Commission
      File Number)








**ALL
      AMERICAN PET COMPANY, INC.**


(Exact
      name of registrant as specified in its charter)








**MARYLAND**
            
            **91-2186665**(State
                or Other Jurisdiction of incorporation or Organization)
            
            (I.R.S.
                Employer Identification No.)








**16501
      VENTURA BOULEVARD, SUITE 514**


**ENCINO,
      CALIFORNIA 91436**


(Address
      of principal executive offices including zip code)








**(818)
      981-2275**


(Registrant's
      telephone number, including area code)








**N/A**


(Former
      Name or Former Address, if Changed Since Last Report)








Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act 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 is a shell company (as defined in Rule
      12b-2 of the Exchange Act).   Yes  ̈**No****x**




Transitional
      Small Business Disclosure Format (check one): Yes  ̈**No****x**




As
      of
      September 12, 2007 the Registrant had 15,838,667 shares outstanding of its
      $.001
      par value common stock.





-
            1
            -
 *Table
            of Contents*




**ALL
      AMERICAN PET COMPANY, INC.**





**QUARTERLY
      REPORT ON FORM 10-QSB** **FOR
      THE PERIOD ENDED JUNE 30, 2007**





**TABLE
      OF CONTENTS**





**Page****Part
                I. FINANCIAL INFORMATION**Item
                1. Financial Statements
            3Condensed Balance Sheets as of June 30, 2007 (Unaudited) and December
                31,
                2006
            3Condensed Statements of Operations (Unaudited) for the Six Months
                ended
                June 30, 2007 and 2006
            4Condensed Statement of Shareholders' Deficit for the Six Months
                ended June 30, 2007 (Unaudited)
              and the Year ended December 31, 2006
            5Condensed Statements of Cash Flows (Unaudited) for the Six Months
                ended
                June 30, 2007 and 2006
            6Notes to Condensed Financial Statements (Unaudited)
            7
                -
                15Item
                2. Management's Discussion and Analysis and Plan of
                Operation
            16Item
                3. Controls and Procedures
            21**Part
                II. OTHER INFORMATION**Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            22Item
                6. Exhibits
            22Signatures
            23











-
            2
            -
 *Table
            of Contents*





**PART
      I**





**ITEM
      1. FINANCIAL STATEMENTS**





**ALL-AMERICAN
      PET COMPANY, INC.**


CONDENSED
      BALANCE SHEETS





**June
                30,**
            
            
            **December
                31,****2007**
            
            
            **2006**(Unaudited)**ASSETS**Current
                Assets:Cash
                and cash equivalents
            
            $
            7,479
            
            
            $
            --Accounts
                receivable
            
            
            6,657
            
            
            
            115,620Inventories
            
            
            164,555
            
            
            
            189,818Total
                current assets
            
            
            178,691
            
            
            
            305,438Machinery
                and equipment, net
            
            
            214,913
            
            
            
            244,857Deferred
                offering costs
            
            
            --
            
            
            
            289,721Other
                assets
            
            
            52,555
            
            
            
            24,166**Total
                assets**
            
            $
            446,159
            
            
            $
            864,182**LIABILITIES
                AND SHAREHOLDERS' DEFICIT**Current
                Liabilities:Bank
                overdraft
            
            $
            --
            
            
            $
            5,244Accounts
                payable
            
            
            1,253,030
            
            
            
            1,021,717Accrued
                officer salaries
            
            
            112,500
            
            
            
            118,270Accrued
                payroll and employee benefits - other
            
            
            651,355
            
            
            
            339,245Short-term
                notes payable
            
            
            290,000
            
            
            
            325,000Short-term
                notes payable - related party
            
            
            485,000
            
            
            
            450,000Short-term
                notes payable - officer
            
            
            10,038
            
            
            
            15,000Current
                portion of capital lease obligations
            
            
            54,280
            
            
            
            49,981Accrued
                slotting fees
            
            
            181,403
            
            
            
            277,014Other
                current liabilities
            
            
            160,245
            
            
            
            115,131Dividend
                Payable
            
            
            90,400
            
            
            
            45,200Total
                current liabilities
            
            
            3,288,251
            
            
            
            2,761,802Capital
                lease obligations, net of current portion
            
            
            44,009
            
            
            
            72,268Total
                liabilities
            
            
            3,332,261
            
            
            
            2,834,070Commitments
                and contingenciesShareholders'
                Deficit:Preferred
                stock, $0.001 par value, 10,000,000 shares authorized
            
            
            --
            
            
            
            --Series
                A Preferred stock, 56,500 shares issued and outstanding; 8% cumulative
                dividend redeemable by the Company at $10 per share plus one share
                of
                common stock and any unpaid dividends
            
            
            565,000
            
            
            
            565,000Common
                stock, $0.001 par value, 50,000,000 shares authorized; 15,374,567
                issued
                and outstanding June 30, 2007, 11,660,667 issued and outstanding
                December
                31, 2006
            
            
            15,375
            
            
            
            11,661Additional
                paid-in capital
            
            
            2,851,766
            
            
            
            2,198,480Accumulated
                deficit
            
            
            (6,318,242
            )
            
            
            (4,745,029
            )Total
                shareholders' deficit
            
            
            (2,886,101
            )
            
            
            (1,969,888
            )**Total
                liabilities and shareholders' deficit**
            
            $
            446,159
            
            
            $
            864,182







**See
      accompanying notes to the condensed financial statements.**




-
            3
            -
 *Table
            of Contents*







**ALL-AMERICAN
      PET COMPANY, INC.**


CONDENSED
      STATEMENTS OF OPERATIONS


(Unaudited)





**For
                the Six Months Ended June 30,****2007**
            
            
            **2006**Sales,
                net of discounts
            
            $
            43,372
            
            
            $
            79,303Slotting
                and sales incentive fees
            
            
            25,000
            
            
            
            164,316Net
                sales
            
            
            68,372
            
            
            
            243,619Cost
                of goods sold
            
            
            56,934
            
            
            
            55,237Gross
                (Loss) Profit
            
            
            11,438
            
            
            
            188,382Operating
                expenses:Sales
                and marketing
            
            
            232,932
            
            
            
            158,111General
                and administrative
            
            
            1,241,498
            
            
            
            849,978Research
                and development
            
            
            --
            
            
            
            --Other
            
            
            1,135
            
            
            
            2,061Total
                Operating expenses
            
            
            1,475,565
            
            
            
            1,010,150Loss
                from operations
            
            
            (1,464,127
            )
            
            
            (821,768
            )Other
                expensesInterest
                expense
            
            
            (63,086
            )
            
            
            (74,881
            )Income
                (loss) before income taxes
            
            
            (1,527,213
            )
            
            
            (896,649
            )Provision
                for income taxes
            
            
            800
            
            
            
            --Net
                loss
            
            
            (1,528,013
            )
            
            
            (896,649
            )Preferred
                stock dividend
            
            
            45,200
            
            
            
            45,200Net
                loss attributable to common stockholders
            
            $
            (1,573,213
            )
            
            $
            (941,849
            )Net
                loss per share-common (basic & diluted)
            
            
            (0.12
            )
            
            
            (0.09
            )Weighted
                average number of common shares outstanding (basic and
                diluted)
            
            
            13,167,374
            
            
            
            10,365,278







**See
      accompanying notes to the condensed financial statements**.





-
            4
            -
 *Table
            of Contents*







**ALL-AMERICAN
      PET COMPANY, INC.**


CONDENSED
      STATEMENT OF SHAREHOLDERS' DEFICIT


FOR
      THE
      SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) AND
      THE
      YEAR ENDED DECEMBER 31, 2006





**Common
                Stock**
            
            
            **Common**
            
            
            **Series
                A Preferred Stock**
            
            
            **Additional**
            
            
            
            
            
            **Total
                Shareholders'****Shares**
            
            
            **Amount**
            
            
            **Stock
                Subscribed**
            
            
            **Shares**
            
            
            **Amount**
            
            
            **Paid-in
                Capital**
            
            
            **Accumulated
                Deficit**
            
            
            **Equity
                (Deficit)****Balance
                at December 31, 2005**
            
            
            7,500,000
            
            
            
            7,500
            
            
            
            100,000
            
            
            
            56,500
            
            
            
            565,000
            
            
            
            443,004
            
            
            
            (2,186,563
            )
            
            
            (1,071,059
            )Stock
                issued through private placement
            
            
            3,094,000
            
            
            
            3,094
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,324,038
            
            
            
            -
            
            
            
            1,327,132Common
                stock issued previously subscribed
            
            
            750,000
            
            
            
            750
            
            
            
            (100,000
            )
            
            
            -
            
            
            
            -
            
            
            
            99,250
            
            
            
            -
            
            
            
            -Beneficial
                conversion feature on convertible notes payable
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            25,000
            
            
            
            -
            
            
            
            25,000Warrants
                issued with convertible notes payable
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            9,089
            
            
            
            -
            
            
            
            9,089Conversion
                of notes payable to common stock
            
            
            316,667
            
            
            
            317
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            124,683
            
            
            
            -
            
            
            
            125,000Additional
                contribution from shareholders from forgiveness of accrued
                salaries
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            190,616
            
            
            
            -
            
            
            
            190,616Series
                A Preferred Stock Dividends
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (45,200
            )
            
            
            (45,200
            )Reclassification
                of prior year convertible note
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (17,200
            )
            
            
            -
            
            
            
            (17,200
            )Net
                loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,513,266
            )
            
            
            (2,513,266
            )**Balance
                at December 31, 2006**
            
            
            11,660,667
            
            
            $
            11,661
            
            
            $
            -
            
            
            
            56,500
            
            
            $
            565,000
            
            
            $
            2,198,480
            
            
            $
            (4,745,029
            )
            
            $
            (1,969,888
            )Stock
                issued through private placement
            
            
            2,213,990
            
            
            
            2,214
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            504,786
            
            
            
            -
            
            
            
            507,000Stock
                unissued through private placement
            
            
            1,500,000
            
            
            
            1,500
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            148,500
            
            
            
            -
            
            
            
            150,000Series
                A Preferred Stock Dividends
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (45,200
            )
            
            
            (45,200
            )Net
                loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,528,013
            )
            
            
            (1,528,013
            )**Balance
                at June 30, 2007**
            
            
            15,374,657
            
            
            $
            15,375
            
            
            $
            0
            
            
            
            56,500
            
            
            $
            565,000
            
            
            $
            2,851,766
            
            
            
            (6,318,242
            )
            
            $
            (2,886,101
            )









**See
      accompanying notes to the condensed financial statements.**








-
            5
            -
 *Table
            of Contents*




**ALL-AMERICAN
      PET COMPANY, INC.**


CONDENSED
      STATEMENTS OF CASH FLOWS


(Unaudited)





**For
                the Six Months Ended**
              **June
                30,****2007**
            
            
            **2006**Cash
                flows from operating activities:Net
                loss
            
            $
            (1,528,013
            )
            
            $
            (896,649
            )Adjustments
                to reconcile loss to net cash flows used
                in operating activities:Depreciation
                and amortization
            
            
            29,944
            
            
            
            27,039Deferred
                offering costs
            
            
            289,721
            
            
            
            --Non-cash
                interest recorded due to warrants issued
            
            
            --
            
            
            
            39,818Reduction
                in accrued slotting fee
            
            
            (40,000
            )
            
            
            (208,439
            )Modification
                to capital lease
            
            
            
            
            
            
            (8,358
            )(Increase)
                decrease in:Accounts
                receivable
            
            
            108,963
            
            
            
            (15,904
            )Other
                receivable
            
            
            -
            
            
            
            -Inventories
            
            
            25,263
            
            
            
            (232,606
            )Due
                from officers
            
            
            
            
            
            
            (23,301
            )Advances
                to vendors
            
            
            -
            
            
            
            -Prepaid
                expenses
            
            
            (43,295
            )
            
            
            -Other
                assets
            
            
            14,906
            
            
            
            2,587Increase
                (decrease) in:Accounts
                payable
            
            
            231,313
            
            
            
            128,630Accrued
                officer salaries
            
            
            (5,770
            )
            
            
            -Accrued
                payroll and employee benefits
            
            
            312,110
            
            
            
            (31,473
            )Accrued
                slotting fees
            
            
            (55,611
            )
            
            
            (57,865
            )Other
                current liabilities
            
            
            45,114
            
            
            
            86,110**Net cash used in operating activities**
            
            
            (615,355
            )
            
            
            (1,190,411
            )Cash
                flows from investing activities:Purchases
                of machinery and equipment
            
            
            -
            
            
            
            (8,000
            )**Net cash used in investing activities**
            
            
            -
            
            
            
            (8,000
            )Cash
                flows from financing activities:Bank
                overdraft
            
            
            (5,244
            )
            
            
            (14,873
            )Net
                proceeds (payments) from (on) short-term debt
            
            
            (4,962
            )
            
            
            90,000Principal
                payments on capital lease obligations
            
            
            (23,960
            )
            
            
            (79,963
            )Deferred
                offering costs
            
            
            
            
            
            
            (173,885
            )Collection
                of common stock subscription receivable
            
            
            --
            
            
            
            50,000Proceeds
                from sale of commons stock
            
            
            657,000
            
            
            
            1,327,132**Net cash provided by financing
                activities**
            
            
            622,834
            
            
            
            1,198,411Increase
                (decrease) in cash and cash equivalents
            
            
            7,479
            
            
            
            --**Cash
                and cash equivalents:**Beginning of period
            
            
            --
            
            
            
            --End of period
            
            $
            7,479
            
            
            $
            --**Supplemental
                disclosure of cash flow information:**Cash paid during the period for interest
            
            $
            4,977
            
            
            $
            10,400Cash paid during the period for income taxes
            
            $
            --
            
            
            $
            800**Non-cash
                financing and investing activities:**Contribution of accrued compensation to additional paid-in
                capital
            
            $
            --
            
            
            $
            205,616Conversion of notes payable to common stock
            
            
            --
            
            
            
            125,000Warrants issued to convertible debt holders upon
                conversion
            
            
            --
            
            
            
            9,089Dividends payable on Series A Preferred stock
            
            
            (45,200
            )
            
            
            (45,200
            )Beneficial Conversion feature on convertible debt
            
            
            --
            
            
            
            25,000Reduction in accrued slotting fee
            
            
            (40,000
            )




**See
      accompanying notes to the condensed financial
      statements.**




-
            6
            -
 *Table
            of Contents*






**ALL-AMERICAN
      PET COMPANY, INC.**


**NOTES
      TO THE CONDENSED FINANCIAL STATEMENTS**


JUNE
      30,
      2007 (UNAUDITED)








**1.   ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**Organization
      and Nature of Operations**





All-American
      Pet Company, Inc. was incorporated in New York in 2003 as a Subchapter S
      Corporation under the Internal Revenue Code of 1986. The Company produces,
      markets and sells premium dog food primarily through supermarkets and grocery
      stores under the brand name Bowwow Breakfast Cereal (Bowwow Breakfast) in the
      United States. The Company developed the first line of commercial dog food
      specifically targeted for the morning meal.





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. Prior
      to
      the merger, the Company amended the shareholder agreements to accommodate new
      investors. In addition, two of the four shareholders at December 31, 2005
      converted their common shares into Series A preferred stock (see note
      12).





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





**Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent 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, coupon liabilities and other trade spending
      liabilities.





**Cash
      Equivalents**





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





**Fair
      Value of Financial Instruments**





The
      carrying amounts of the financial instruments, including cash and cash
      equivalents, accounts receivable, bank overdraft, accounts payable, accrued
      payroll and employee benefits, accrued slotting fees and other current
      liabilities, approximate fair value due to the short maturities of these
      financial instruments. The notes payable and capital lease obligations are
      also
      considered financial instruments whose carrying amounts approximate fair
      values.





**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 collectibility
      of our 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.  As of June
      30, 2007 (unaudited) and December 31, 2006, the Company determined that no
      allowance for uncollectible accounts is necessary. If circumstances related
      to
      specific customers deteriorate, our estimates of the recoverability of
      receivables associated with those customers could materially
      change.





**Inventories**





Inventories
      consist of raw materials, packaging and supplies and finished goods and are
      valued at the lower of cost (first-in, first-out (FIFO) method) 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 in accordance with Statement of Financial Accounting Standards
      (“SFAS”) No. 144 “Accounting for the Impairment or Disposal of Long-Lived
      Assets.” The Company evaluates recoverability of property, plant and equipment
      to be held and used by comparing the carrying amount of an 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.





-
          7
          -
 *Table
          of Contents*






**ALL-AMERICAN
        PET COMPANY, INC.**
 **NOTES
        TO THE CONDENSED FINANCIAL STATEMENTS**
 JUNE
        30,
        2007 (UNAUDITED)






Estimated
      useful lives are as follows:





Computer equipment and software
            3
–
                5 yearsMachinery and equipment
            3
–
                7 yearsOffice furniture and equipment
            3
–
                5 years





**Significant
      Customers and Vendors**





During
      the period ended June 30, 2007, three customers accounted for approximately
      71%
      of gross sales, and during the period ended June 30, 2006, two customers
      accounted for 100% of gross sales. During the periods ended June 30, 2007,
      two
      vendors accounted for approximately 100% of gross purchases, and during the
      period ended June 30, 2006, two vendors accounted for 82% of gross
      purchases.





**Revenue
      Recognition, Sales Incentives and Slotting Fees**





In
      accordance with Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB
      104”), 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 EITF No. 00-14, EITF No. 00-25 and EITF No. 01-09,
      these costs are recorded when revenue is recognized and are generally classified
      as a reduction of revenue. Slotting fees refer to oral 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 fees at the time orders are first shipped to
      customers. During the period ended June 30, 2006, the Company settled with
      a
      major customer for previously accrued slotting fees. The customer had been
      acquired in December 2005 and after merger it was unable to deliver the shelf
      space and outlets originally contemplated by the original agreement. The
      previously agreed obligation of $219,535 was adjusted due to this change in
      circumstance. The adjustment was recorded as a reduction to slotting fees,
      resulting in slotting income of $144,535 for the period ended June 30,
      2006.





**Shipping
      and Freight Charges**





The
      Company incurs costs related to shipping and handling of manufactured products,
      which amounted to $9,503 and $7,618 for the periods ended June 30, 2007 and
      2006, respectively. These costs are expensed as incurred as a component of
      sales
      and marketing expense. The Company also incurs shipping and handling charges
      related to the receipt of raw materials, which are recorded as a component
      of
      cost of goods sold. Payments received from customers for shipping and handling
      costs are included as a component of net sales upon recognition of the related
      sale.





**Advertising
      Costs**





Advertising
      costs, including media advertising, design and printing of coupons, and other
      advertising, which are included in sales and marketing expense, are expensed
      when the advertising first takes place. Advertising expense was approximately
      $170,681 and $22,114 during the periods ended June 30, 2007 and 2006,
      respectively.





**Spoils
      Costs**





Expenses
      for spoils that are incurred after our products are received by our customers
      are recorded as a reduction in gross sales. Expenses for spoils that are
      incurred while raw materials are stored pending orders are included in costs
      of
      good sold. The Company incurred $11,820 and $24,396 for spoils incurred after
      our products were received by our customers during the six months ended June
      30,
      2007 and 2006, respectively. In addition, the Company incurred $2,297 and $9,036
      for spoils that occurred while our raw materials were stored pending orders
      during the periods ended June 30, 2007 and 2006, respectively. The Company
      regularly evaluates the cost of spoils in relationship to sales to determine
      if
      its allowance is adequate. As of the six months ended June 30, 2007 and 2006,
      the Company had not booked an allowance for these costs.





**Research
      and Development Costs**





Research
      and development costs are expensed as incurred.


-
            8
            -
 *Table
            of Contents*
  **ALL-AMERICAN
          PET COMPANY, INC.**
 **NOTES
          TO THE CONDENSED FINANCIAL STATEMENTS**
 JUNE
          30,
          2007 (UNAUDITED)


**Distribution
      of Free Products**





In
      order
      to generate interest in the Company’s dog food products, the Company sends
      sample products to investors, prospective buyers and consumers. The costs
      related to these samples are expensed as sales and marketing expenses. During
      the periods ended June 30, 2007 and 2006, the Company expensed $2,691 and
      $11,000, respectively related to samples.




**Net
      Loss Attributable to Common Shareholders**





Net
      income (loss) per share is calculated using the weighted average number of
      common shares outstanding for the period and diluted income (loss) per share
      is
      computed using the weighted average number of common shares and dilutive common
      equivalent shares outstanding.  There were 11,660,667 common stock
      shares outstanding for 32 days 11,992,667 for 28 days, 12,278,667 for 31 days,
      13,874,667 for 60 days and 15,374,667 for 31 days for the period ended June
      30,
      2007. This resulted in a weighted average number of common stock shares
      outstanding of 13,167,374. Net income (loss) per share and diluted net income
      (loss) per share are the same for all periods presented because common
      equivalent shares of 942,031 and 937,031 for the periods ended June 30, 2007
      and
      2006, respectively, were not used in the computation of net loss per share
      because the results would be anti-dilutive. The common equivalent shares are
      a
      result of warrants issued for convertible debt.





**Comprehensive
      Income Reporting**





SFAS
      No.
      130, “Reporting Comprehensive Income” establishes standards for reporting and
      displaying comprehensive income and its components in a full set of general
      purpose financial statements. The objective of SFAS No. 130 is to report a
      measure of all changes in the equity of an enterprise that result from
      transactions and other economic events of the period other than transactions
      with owners. Comprehensive loss did not differ from currently reported net
      loss
      in the periods presented.





**2.   BASIS
      OF PRESENTATION**





The
      condensed financial statements as of June 30, 2007 and for the six months ended
      June 30, 2007 and 2006 are unaudited. In the opinion of management, such
      condensed financial statements include all adjustments (consisting of normal
      recurring accruals) necessary for the fair presentation of the financial
      position and the results of operations. The results of operations for the
      periods presented are not necessarily indicative of the results to be expected
      for the full year. The interim condensed financial statements should be read
      in
      conjunction with the audited financial statements of the year ended December
      31,
      2006 appearing in Form 10-KSB filed on July 16 2007.





The
      condensed financial statements have been presented on a going concern basis,
      which contemplates, but does not include adjustments for the realization of
      assets and satisfaction of liabilities in the normal course of business. The
      Company has a limited operating history and limited funds. As shown in the
      financial statements, the Company incurred a net loss of $1,528,013 and a
      negative cash flow from operations of $615,355 for the period ended June 30,
      2007, and had a working capital deficit of $3,109,360 and a stockholders’
deficit of $2,866,101 as of June 30, 2007. These factors raised substantial
      doubt about the Company’s ability to continue as a going concern. The condensed
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty. The Company believes that it is appropriate for
      the
      condensed financial statements to be prepared on a going concern
      basis.





The
      Company is dependent upon outside financing to continue operations. It is
      management’s plans to raise necessary funds via a private placement of its
      common stock to satisfy the capital requirements of the Company’s business plan.
      There is no assurance that the Company will be able to raise necessary funds
      or
      that if it is successful in raising the necessary funds, that the Company will
      successfully operate 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 common stock sufficient to meet its obligations
      on a
      timely basis and ultimately to attain profitable operations.





Certain
      reclassifications have been made to the previously reported amounts to conform
      to the Company’s current period presentation. Effective March 31, 2006, the
      Company elected to reclassify certain expenses from cost of goods sold to sales
      and marketing expense to conform to this period’s income statement. The effect
      of this reclassification increases gross profit from $163,981 to $168,981 for
      the period ended June 30, 2006.





**3.   NEW
      ACCOUNTING PRONOUNCEMENTS**





References
      to the "FASB", "SFAS" and "SAB" herein refer to the "Financial Accounting
      Standards Board", "Statement of Financial Accounting Standards", and the "SEC
      Staff Accounting Bulletin", respectively.





Effective
      January 1, 2007, the Company adopted Financial Accounting Standard Board
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes (“FIN 48”),
      an interpretation of FASB Statement No. 109, Accounting for Income Taxes.” The
      Interpretation addresses the determination of whether tax benefits claimed
      or
      expected to be claimed on a tax return should be recorded in the financial
      statements. Under FIN 48, we may recognize the tax benefit from an uncertain
      tax
      position only if it is more likely than not that the tax position will be
      sustained on examination by the taxing authorities, based on the technical
      merits of the position. The tax benefits recognized in the financial statements
      from such a position should be measured based on the largest benefit that has
      a
      greater than fifty percent likelihood of being realized upon ultimate
      settlement. FIN 48 also provides guidance on derecognition, classification,
      interest and penalties on income taxes, account in interim periods and requires
      increased disclosures. At the date of adoption, and as of June 30, 2007, the
      Company does not have a liability for unrecognized tax benefits.





-
          9
          -
 *Table
          of Contents*




**ALL-AMERICAN
        PET COMPANY, INC.**
 **NOTES
        TO THE CONDENSED FINANCIAL STATEMENTS**
 JUNE
        30,
        2007 (UNAUDITED)






The
      Company files income tax returns in the U.S. federal jurisdiction and various
      states. The Company is subject to U.S. federal or state income tax examinations
      by tax authorities for years after 2006. During the periods open to examination,
      the Company has net operating loss and tax credit carry forwards for U.S.
      federal and state tax purposes that have attributes from closed periods. Since
      these NOLs and tax credit carry forwards may be utilized in future periods,
      they
      remain subject to examination.





The
      Company’s policy is to record interest and penalties on uncertain tax provisions
      as income tax expense. As of June 30, 2007, the Company has no accrued interest
      or penalties related to the uncertain tax positions.





In
      September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," which
      provides enhanced guidance for using fair value to measure assets and
      liabilities. SFAS No. 157 provides a common definition of fair value and
      establishes a framework to make the measurement of fair value in generally
      accepted accounting principles more consistent and comparable. SFAS No. 157
      also
      requires expanded disclosures to provide information about the extent to which
      fair value is used to measure assets and liabilities, the methods and
      assumptions used to measure fair value, and the effect of fair value measures
      on
      earnings.  SFAS No. 157 is effective for financial statements issued
      in fiscal years beginning after November 15, 2007 and to interim periods within
      those fiscal years. The Company is currently in the process of evaluating the
      effect, if any, the adoption of SFAS No. 157 will have on its results of
      operations, financial condition, cash flows or disclosures through June 30,
      2007.





In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year Misstatements
      when Quantifying Misstatements in Current Year Financial Statements". SAB No.
      108 was issued in order to eliminate the diversity in practice surrounding
      how
      public companies quantify financial statement misstatements. SAB No. 108
      requires that registrants quantify errors using both a balance sheet (iron
      curtain) approach and an income statement (rollover) approach then evaluate
      whether either approach results in a misstated amount that, when all relevant
      quantitative and qualitative factors are considered, is material. SAB No. 108
      is
      effective for fiscal years ending after November 15, 2006. The Company has
      adopted the bulletin during 2006. The adoption did not have a material effect
      on
      results of operations, financial position, or cash flows through June 30,
      2007.





In
      February 2007, the Financial Accounting Standards Board (FASB) issued FASB
      Statement No. 159, “The Fair Value Options for Financial Assets and Financial
      Liabilities, Including an amendment of FASB Statement No. 115” (FAS 159). FAS
      159, which becomes effective for the company on January 1, 2008, permits
      companies to choose to measure many financial instruments and certain other
      items at fair value and report unrealized gains and losses in earnings. Such
      accounting is optional and is generally to be applied instrument by instrument.
      The Company does not anticipate that elections, if any, of this fair-value
      option will have a material effect on its financial condition, results of
      operations, cash flows or disclosures.





In
      December 2006, the FASB issued a Staff Position (“FSP”) on EITF 00-19-2,
“Accounting for Registration Payment Arrangements (FSP 00-19-2”). This FSP
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement, whether issued
      as a separate agreement or included as a provision of a financial instrument
      or
      other agreement, should be separately recognized and measured in accordance
      with
      SFAS No. 5, “Accounting for Contingencies”. If the transfer of consideration
      under a registration payment arrangement is probable and can be reasonably
      estimated at inception, the contingent liability under the registration payment
      arrangement is included in the allocation of proceeds from the related financing
      transaction (or recorded subsequent to the inception of a prior financing
      transaction) using the measurement guidance in SFAS No. 5. This FSP is effective
      immediately for registration payment arrangements and the financial instruments
      subject to those arrangements that are entered into or modified subsequent
      to
      the issuance of the FSP.  For prior arrangements, the FSP is effective
      for financial statements issued for fiscal years beginning after December 15,
      2006 and interim periods within those years. The Company has adopted the FSP
      and
      determined that it has no material impact on its financial condition, results
      of
      operations, cash flows or disclosures.





**4.   INVENTORIES**





Detail
      of
      inventories at June 30, 2007 (unaudited) and December 31, 2006 is as
      follows:





**2007**
            
            
            **2006**Raw
                materials
            
            $
            83
            
            
            $
            57,807Packaging
                and supplies
            
            
            84,286
            
            
            
            89,515Finished
                goods
            
            
            80,186
            
            
            
            42,496$
            164,555
            
            
            $
            189,818









-
          10
          -
 *Table
          of Contents*







**ALL-AMERICAN
        PET COMPANY, INC.**
 **NOTES
        TO THE CONDENSED FINANCIAL STATEMENTS**
 JUNE
        30,
        2007 (UNAUDITED)






**5.   MACHINERY
      AND EQUIPMENT**





Detail
      of
      inventories at June 30, 2007 (unaudited) and December 31, 2006 is as
      follows:





**2007**
            
            
            **2006**Computer
                equipment and software
            
            $
            66,023
            
            
            $
            66,023Furniture
                and fixtures
            
            
            4,146
            
            
            
            4,146Packaging
                equipment
            
            
            288,484
            
            
            
            288,484358,653
            
            
            
            358,653Accumulated
                depreciation
            
            
            (143,740
            )
            
            
            (113,796
            )$
            214,913
            
            
            $
            244,857





Included
      in machinery and equipment was $269,984 as of June 30, 2007 (unaudited) and
      December 31, 2006, of assets acquired under capital leases. Accumulated
      depreciation for these assets was $99,636 and $80,352 at June 30, 2007 and
      December 31, 2006, respectively.





Depreciation
      expense for the six months ended June 30, 2007 and 2006 was $19,285 and $13,520,
      respectively.





**6.   DEFERRED
      OFFERING COSTS**





Deferred
      offering costs mainly consist of legal and accounting fees related to the filing
      of the Company’s Registration Statement on Form SB-2 (the “SB-2”). The Company’s
      SB-2 became effective in January 2007, and accordingly, the “Deferred Asset” of
      $289,721 was expensed for the period ended March 31, 2007.





**7.   OTHER
      ASSETS**





Other
      assets include the following at June 30, 2007 (unaudited) and December 31,
      2006:





**2007**
            
            
            **2006**Prepaid
                assets
            
            $
            43,295
            
            
            $
            11,181Deposits
            
            
            9,260
            
            
            
            12,985$
            52,555
            
            
            $
            24,166





**8.   OTHER
      CURRENT LIABILITIES**





Other
      current liabilities include the following at June 30, 2007 (unaudited) and
      December 31, 2006:





**2007**
            
            
            **2006**Interest
                payable
            
            $
            108,876
            
            
            $
            55,264Deferred
                rent
            
            
            27,252
            
            
            
            26,070State
                taxes
            
            
            1,600
            
            
            
            800Accrued
                financing reimbursement
            
            
            --
            
            
            
            3,375Other
            
            
            22,516
            
            
            
            29,622$
            160,245
            
            
            $
            115,131






-
          11
          -
 *Table
          of Contents*






**ALL-AMERICAN
        PET COMPANY, INC.**
 **NOTES
        TO THE CONDENSED FINANCIAL STATEMENTS**





**9.   COMMITMENTS**





**Operating
      Leases**





The
      Company leases its corporate offices under a non-cancelable operating lease
      expiring May 2010. The Company was unable to make regular lease payments for
      part of 2006 and much of 2005 and was in default of the lease. The Company
      reached an agreement in October 2006 to pay $10,000 bi-weekly until lease
      payments are current. There were no penalties assessed as a result of the
      default, however the Company is charged a monthly late fee, which is immaterial,
      on the lease payments in arrears. Approximately $35,365 of lease payments
      payable is included in accounts payable as of June 30, 2007.





**Capital
      Lease Obligations**





The
      Company leases certain equipment under agreements classified as capital leases.
      The leases were recorded to reflect the present value of the net minimum lease
      payment, at acquisition date, using an interest rate of 16.62%. In March 2006,
      one of the leases was restated with slightly modified terms resulting in a
      reduction of the liability by approximately $9,000. As of June 30, 2007, the
      Company has total lease obligations of $98,289.





**10.   NOTE
      PAYABLE, RELATED PARTY LOAN AND CONVERTIBLE NOTES PAYABLE**





At
      June
      30, 2007 (unaudited) and December 31, 2006, outstanding debt consisted of the
      following:





**June
                30,**
            
            **December
                31,****2007**
            
            **2006**(a)
            Note
                payable, in default, interest accrued at 10% and due upon
                demand
            $
            209,500
            
            $
            219,500(b)
            Note
                payable to related party, interest at 20% and due on December 26,
                2007
            
            50,000
            
            
            50,000(c)
            Convertible
                note payable, interest at 6%, due on March 14 and March 28,
                2007
            
            20,000
            
            
            20,000(d)
            Notes
                payable to related parties, interest at 15% per annum. Interest and
                principal due on demand
            
            445,038
            
            
            415,000(e)
            Notes
                payable, interest at 15% per annum. Interest and principal due on
                demand
            
            60,500
            
            
            85,500785,038
            
            
            790,000Less
                current portion
            
            (785,038
            )
            
            (790,000
            )Long-term
                portion
            $
            --
            
            $
            --





**(a)
      Note Payable**


On
      April
      27, 2004, the Company entered into a note payable agreement with an individual
      to borrow $150,000 at 10% interest per annum. The note was payable on April
      27,
      2005. As a condition of entering into the note, the Company was also required
      to
      pay additional fees totaling $50,000 upon maturity of the note. The Company
      considered this amount to be additional interest and, accordingly, recorded
      it
      as an expense using the effective interest method over the term. The Company
      paid $1,000 of interest during the note term and on April 27, 2005 the note
      was
      amended to require a five-month repayment of all accrued principal and interest
      and an additional $30,000 of fees. The additional fees were also accrued as
      interest expense using the effective interest method. The Company made payments
      aggregating $18,000 during the new term and on September 30, 2005 became in
      default of this obligation. All accrued interest as of September 30, 2005 was
      recorded to reflect the total unpaid principal obligation of $232,000 at
      December 31, 2005. Accrued interest in the amount of $38,863 and $28,258 is
      included in interest payable at June 30, 2007 and December 31, 2006,
      respectively. The Company made principal payments of $10,000 and $12,500 for
      the
      period ended June 30, 2007 and the year ended December 31, 2006.





**(b)
      Related Party Notes**


On
      October 25, 2005, the Company entered into a related party loan with a relative
      of a shareholder in the amount of $50,000. The loan accrues interest at 20%
      per
      annum and is due in a lump sum of principal and accrued interest on maturity.
      The original due date of this note was April 26, 2006, which was subsequently
      extended for 60 days until June 26, 2006. On June 26, 2006, this note was
      extended again for an additional 18 months until December 26, 2007. Accrued
      interest in the amount of $16,795 and $11,863 is included in interest payable
      at
      June 30, 2007 and December 31, 2006, respectively.






-
          12
          -
 *Table
          of Contents*




**ALL-AMERICAN
          PET COMPANY, INC.**
 **NOTES
          TO THE CONDENSED FINANCIAL STATEMENTS**





**(c)
      Convertible Notes Payable**


On
      September 15, 2005, the Company commenced a private placement offering of
      convertible notes to raise up to $500,000. Pursuant to this offering, on each
      of
      September 15 and September 29, 2005, the Company issued a convertible debenture
      for $10,000. The September 15 debenture was due on March 15, 2007, and accrued
      interest at an annual rate of six percent, with the interest to be due and
      payable annually in arrears on December 31, 2005, December 31, 2006 and March
      15, 2007. The September 29 debenture was due on March 28, 2007, and accrued
      interest at an annual rate of six percent, with the interest to be due and
      payable annually in arrears on December 31, 2005, December 31, 2006 and March
      28, 2007. Each note holder has the option at any time to convert the principal
      amount of each note into shares of common stock at a conversion price at $0.65
      per share. In addition, the conversion price is subject to adjustment in the
      event the Company issues additional shares of common stock for less than $0.65
      per share. In connection with the issuance of each note, each note holder
      received a warrant to purchase 7,692 shares of common stock at an exercise
      price
      of $1.00 per share. The Company is now in default on these obligations. There
      were no penalties assessed as a result of the default. Accrued interest in
      the
      amount of $2,147 is included in interest payable at June 30, 2007.





**(d)
      Related Party Notes**


On
      August
      29, 2006, the Company entered into a related party loan with an
      officer/shareholder in the amount of $25,000. The loan accrues interest at
      15%
      per annum and is due on demand. The Company made principal payments of $4,962
      and $10,000 for the period ended June 30, 2007 and the year ended December
      31,
      2006. Accrued interest in the amount of $2,185 and $1,259 is included in
      interest payable at June 30, 2007 and December 31, 2006,
      respectively.





During
      the fourth quarter of 2006, the Company entered into related party loans with
      a
      shareholder in the aggregate amount of $400,000. The loans accrue interest
      at
      15% per annum and are due on demand. Accrued interest in the amount of $38,219
      and $8,630 is included in interest payable at June 30, 2007 and December 31,
      2006, respectively.





On
      December 26, 2006 the Company borrowed additional funds of $25,000 from two
      individuals who became investors in 2007. The loans accrue interest at 15%
      per
      annum and are due December 26, 2007. Accrued interest in the amount of $1,900
      and $52 is included in interest payable at June 30, 2007 and December 31, 2006,
      respectively.





On
      January 24, 2007, the Company entered into a related party loan with a
      shareholder in the amount of $10,000. The loan accrues interest at 15% per
      annum
      and is due on January 23, 2008. Accrued interest in the amount of $674 is
      included in the interest payable at June 30, 2007.





**(d)
      Notes Payable**


During
      2006, the Company borrowed additional funds of $62,500 from two unrelated
      individuals to fund current operations. The notes are due on October 13, 2007
      and accrue interest at 15% per annum. The Company made payments of $2,000 during
      the period ended December 31, 2006. Accrued interest in the amount of $8,124
      and
      $3,650 is included in interest payable at June 30, 2007 and December 31, 2006,
      respectively.





On
      February 21, 2007, the Company borrowed additional funds of $22,500 from an
      unrelated individual to fund current operations. The note, which was due March
      1, 2007, was paid in full February 27, 2007. The Company issued 5,000 warrants
      for this short term loan.





During
      the period ended March 31, 2007, two note holders also became investors. As
      a
      result, $25,000 in short-term notes payable at December 31, 2006 was reclassed
      to short-term notes payable related party.





**11.   INCOME
      TAXES**





The
      Company accounts for income taxes under SFAS No. 109, “*Accounting for Income
      Taxes.”*Deferred income tax assets relate to net operating loss
      carryforwards incurred while the Company filed tax returns as a Subchapter
      S
      Corporation under the Internal Revenue Code of 1986 and are not considered
      material. A Subchapter S Corporation’s operating results pass through to
      shareholders, therefore no deferred tax accounting was appropriate when the
      Company had this structure.





Effective
      January 11, 2006, the Company no longer qualified as a Subchapter S Corporation
      when a second class of stock was created. All operating loss carryforwards
      prior
      to January 11, 2006 are not available to offset future taxable earnings of
      the
      Company. There is no provision for federal income taxes because the Company
      has
      incurred operating losses. The Company has recorded a state income tax provision
      of $800, which represents the minimum Franchise Tax Fee in the State of
      California. The minimum Franchise Tax Fee cannot be offset with loss
      carryforwards. Realization of deferred tax assets is dependent upon future
      earnings, if any, the timing and amount of which are uncertain. Accordingly,
      the
      Company has recorded an aggregate $1,731,143 valuation allowance against its
      deferred federal and state tax assets, since it is believed that such assets
      do
      not meet the more likely than not criteria to be recoverable through projected
      future profitable operations in the foreseeable future. The loss carryforwards
      will begin to expire in 2026 and 2012 for federal and state,
      respectively.




-
          13
          -
 *Table
          of Contents*




**ALL-AMERICAN
        PET COMPANY, INC.**
 **NOTES
        TO THE CONDENSED FINANCIAL STATEMENTS**


The
      significant components of the Company’s deferred tax assets are as
      follows:





**Deferred
                Tax Assets as of June 30, 2007 (unaudited)**Federal
            
            
            StateNet
                operating loss2006
            
            $
            2,513,266
            
            
            $
            2,512,4662007
            
            
            1,528,013
            
            
            
            1,527,2134,041,279
            
            
            
            4,039,679Tax
                rate
            
            
            34.00
            %
            
            
            8.84
            %1,374,035
            
            
            
            357,108Valuation
                allowance
            
            
            (1,374,035
            )
            
            
            (357,108
            )$
            --
            
            
            $
            --





**12.   SHAREHOLDERS’
      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.





Prior
      to
      the January 27, 2006 merger into the Maryland corporation, the Company entered
      into the first of three amendments of shareholder agreements to accommodate
      new
      investors, the first of which occurred on November 5, 2004. This agreement
      was
      amended on February 8, 2005 and again on March 1, 2005 to reduce the number
      of
      new investors and increase the commitment of certain investors.





On
      November 30, 2005, the Company signed a letter of intent to enter into a
      transaction with Nortia. The transaction resulted in (i) the Company
      recapitalizing to reflect total common shares outstanding being 7,500,000 common
      shares (ii) Nortia and or Nortia assignees acquiring 750,000 shares of newly
      issued common stock of the newly recapitalized company for an aggregate sales
      price of $100,000 of which $50,000 was paid during the year ended December
      31,
      2005 and $50,000 was reflected as a subscription receivable at December 31,
      2005, and received in January 2006 (iii) Nortia received 500,000 warrants to
      purchase an additional 500,000 shares of common stock at an exercise price
      of
      $0.50 per share.





**Private
      Placement of Common Stock**





During
      the year ended December 31, 2006, the Company raised $1,327,132 (net of costs)
      and issued 3,844,000 shares of common stock from private placement. As a result,
      the Company issued a total of 342,480 warrants at an exercise price of $0.50
      per
      share. An additional 79,167 warrants at an exercise price of $0.50 per share
      were issued with the conversion of $125,000 of notes payable into 316,667 shares
      of common stock.





During
      the six months ended June 30, 2007, the Company raised $657,000 and issued
      3,713,990 shares of common stock from private placement.





**Conversion
      of Shares of Common Stock into Preferred Shares**





As
      an
      additional condition of the December 28, 2005 private placement and
      recapitalization in Maryland, two of the four existing shareholders entered
      into
      an agreement to convert their common shares into 56,500 shares of preferred
      stock designated Series A. The tendered shares of common stock were reallocated
      to the other two founding shareholders such that the total number of issued
      and
      outstanding shares of common stock will not change. This recapitalization was
      recorded retroactively to inception. As a result of the recapitalization, the
      number of shares authorized was increased and as such, the common stock
      previously subscribed but not issued in 2005 was recorded as issued as of
      December 31, 2005.





The
      Series A Preferred Stock is entitled to cumulative dividends of 8% per annum
      and
      is payable on March 1st of each
      year
      beginning in 2006.  Once issued, the Company will have the right, by
      agreement, to redeem the outstanding shares of Series A Preferred Stock at
      their
      liquidation value at anytime. For each share of Series A Preferred Stock that
      is
      redeemed, the holder also shall receive one share of the Company’s common stock
      in addition to the liquidation value. At June 30, 2007 and December 31, 2006,
      $90,400 and $45,200, respectively, is included in dividend payable in the
      accompanying condensed balance sheet. The liquidation preference, which includes
      the unpaid dividends, is valued at $655,400 and $610,200 at June 30, 2007,
      and
      at December 31, 2006, respectively.





-
          14
          -
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          of Contents*




**ALL-AMERICAN
        PET COMPANY, INC.**
 **NOTES
        TO THE CONDENSED FINANCIAL STATEMENTS**
 JUNE
          30,
          2007 (UNAUDITED)




**Warrants
      Issued with Debt**





The
      Company raised $20,000 in 2005 from convertible notes. As a result, the Company
      issued warrants for 15, 384 shares at an exercise price of $1.00 per share.
      A
      Black Scholes calculation determined the value of the warrants was $57 at
      December 31, 2005. The Black Scholes calculation takes into consideration the
      following assumptions: 15,384 as number of shares, a stock price of $0.50,
      an
      exercise price of $1.00, a five year term, volatility rate of 13.3%, discount
      rate of 3.94%, a one day vesting period and a contractual term of five
      years.





The
      Company commenced a private placement offering of convertible notes payable
      and
      raised $25,000 in 2005 and an additional $100,000 in 2006. The notes were
      converted in the first quarter of 2006. As part of the conversion election,
      the
      note holders received warrants to purchase an additional 79,167 shares of common
      stock at an exercise price of $0.50 per share. As a result, the Company recorded
      additional interest expense of $9,089 related to these warrants using a Black
      Scholes calculation. The Black Scholes calculation takes into consideration
      the
      following assumptions: 79,167 as number of shares, a stock price of $0.50,
      an
      exercise price of $.50, a four year term, volatility rate of 13.3%.





On
      November 30, 2005 the Company signed a letter of intent to enter into a private
      placement transaction in which Nortia Capital Partners, L.P. (“Nortia”) received
      500,000 warrants to purchase an additional 500,000 shares of common stock at
      an
      exercise price of $0.50 per share. The Company recorded the fair value of these
      warrants of $51,000 using a Black Scholes calculation. The Black Scholes
      calculation takes into consideration the following assumptions: 500,000 as
      number of shares, a stock price of $0.50, an exercise price of $.50, a two
      year
      term, volatility rate of 13.3%, discount rate of 3.94%, a one day vesting period
      and a contractual term of two years.





During
      the period ended June 30, 2006, the Company concluded a private placement
      transaction resulting in the Company issuing a total of 342,480 warrants at
      an
      exercise price of $0.50 per share. A Black Scholes calculation determined the
      value of the warrants was $39,521 at December 31, 2006. The Black Scholes
      calculation takes into consideration the following assumptions: 342,480 as
      number of shares, a stock price of $0.50, an exercise price of $0.50, a four
      year term, volatility rate of 10.9%, discount rate of 4.51%, a one day vesting
      period and a contractual term of four years.





On
      February 21, 2007, the Company received a loan from an unrelated individual
      to
      fund current operations. For the short term loan, the Company issued 5,000
      warrants to purchase an additional 5,000 shares of common stock at an exercise
      price of $0.50 per share. A Black Scholes calculation determined the value
      of
      the warrants was $134 at March 31, 2007. The Black Scholes calculation takes
      into consideration the following assumptions: 5,000 as number of shares, a
      stock
      price of $0.50, an exercise price of $0.50, a ten month term, volatility rate
      of
      10.9%, discount rate of 5.05%, a one day vesting period and a contractual term
      of ten months.





**Warrants
      Outstanding**





A
      summary
      of the Company’s outstanding warrants and activity for the six months ended June
      30, 2007 is as follows:





Weighted
                  AverageNumber
                  of
            
            
            Exercise
                PriceUnits
            
            
            Per
                ShareOutstanding,
                Beginning of Period
            
            
            937,031
            
            
            $
            0.51Granted
            
            
            5,000
            
            
            
            0.50Forfeitures
            
            
            --
            
            
            
            --Outstanding,
                End of Period
            
            
            942,031
            
            
            $
            0.51Exercisable,
                End of Period
            
            
            942,031
            
            
            $
            0.51





The
      weighted-average remaining contractual life of the warrants outstanding at
      December 31, 2006 was 2.5 years.





**13.   SUBSEQUENT
      EVENT**





Subsequent
      to June 30, 2007, the Company raised an additional $116,000 and issued an
      additional 464,000 shares of common stock as part of a private
      placement.





On
      July
      25, 2007, the Company issued a private placement memorandum for 12,000,000
      shares of common stock at $.25 per share, a total offering of $3,000,000 to
      accredited investors only. In addition, the Company in its sole discretion
      may
      elect to issue up to an additional 2,000,000 shares pursuant to the private
      placement.





On
      July
      30, 2007, the Company filed with the Securities and Exchange Commission a Post
      Effective Amendment No. 5 to its Form SB-2. The amendment registers 4,160,667
      private placement common stock shares at $.50 per share and warrants to purchase
      825,047 common stock shares at $.50 per share.





The
      Company has announced a “$1 Million Dollar Pooches & Parents Look-a-Like”
promotional contest, which it intends to begin in the fall of 2007. This event
      is planned to be a nationwide contest in which contestants will upload pictures
      of themselves and their dogs on the Company’s website, and visitors to the
      website will vote for the contestant they think looks most like their
      dog.  Prizes will be distributed weekly for regional winners, and the
      top regional winners will qualify for a trip to the final event. Regional
      winners will then compete with other regional winners for the title of the
      National Bow Wow $1 million winner.




-
            15
            -
 *Table
            of Contents*







**ITEM
      2.   MANAGEMENT’S DISCUSSION AND
      ANALYSIS OR PLAN OF OPERATION**





The
      statements contained in this report that are not purely historical are
      forward-looking statements. “Forward-looking statements” include statements
      regarding our expectations, hopes, intentions, or strategies regarding the
      future. Forward-looking statements include: statements regarding future products
      or product development; statements regarding future selling, general and
      administrative costs and research and development spending, and our product
      development strategy; statements regarding future capital expenditures and
      financing requirements; and similar forward-looking statements. It is important
      to note that our actual results could differ materially from those in such
      forward-looking statements.





**Summary
      of the Company and its Current Status**





The
      Company produces, markets and sells super-premium dog food primarily through
      supermarkets and grocery stores under the brand name BowWow Breakfast CerealTM,
      which we refer to in this Form 10-QSB as BowWow Breakfast. The Company has
      never
      operated at a profit and is currently under significant financial strain because
      as of September 11, 2007, it had less than $20,000 in operating funds. The
      Company’s total sales for the first six months of 2007 were approximately
      $57,035. The lack of significant sales results from the fact that the Company
      does not have the funds necessary to manufacture any of its products, and it
      does not have any funds to market its products or to pay any other costs
      necessary to place its products in stores where they can be sold. Without an
      immediate capital infusion in the near future, and without a significantly
      substantial infusion of capital within a short time thereafter, the Company
      may
      be forced to limit its operations severely, and it may not be able to
      survive.





**The
      Company’s Business Model**





We
      produce, market and sell super-premium dog food primarily through supermarkets
      and grocery stores under the brand name BowWow Breakfast CerealTM, which we
      target specifically for the morning meal. Our product forms and packaging are
      designed as a breakfast cereal, and we currently offer three breakfast cereal
      products under the BowWow Breakfast brand.





We
      plan
      to formulate a variety of other product concepts in addition to the BowWow
      Breakfast brands. We intend to expand by offering additional packaging
      alternatives with our existing flavors (*e.g.*variety pack of four ounce
      dog food boxes, a 128 ounce jumbo box of dog food, and eight and twenty pound
      bags of dog food for mass merchants). Although we have initially focused on
      commercializing existing product concepts, we also intend to explore
      opportunities to expand within existing product categories and to create new
      product lines. Each of these new initiatives will require substantial capital
      to
      undertake and implement, and we have not identified or received commitments
      from
      any sources of capital.





We
      contract with one non-affiliated dog food manufacturer and one non-affiliated
      box packager to prepare our products in accordance with strict quality assurance
      and quality control standards. We currently maintain arrangements with parties
      that have experience producing and warehousing dry pet food products, and we
      require that these parties use strict ingredient and processing standards for
      the production of our brands. When we produce the BowWow Breakfast brands,
      one
      of our employees is present at the manufacturing facility to supervise
      production, and to test the quality and ingredients of the dog
      food.





We
      intend
      to generate revenue from the sales of super-premium dog food products to our
      supermarket and grocery store customers, which we refer to in this section
      as
      retail customers. Our revenue arrangements with our retail customers often
      include sales incentives and other promotional costs such as coupons,
      volume-based discounts and off-invoice discounts. In addition, we may pay
“slotting fees,” which are fees paid based on an oral arrangement with a retail
      customer to have our products placed on its shelves. Slotting fees are a
      one-time fee paid to a retail customer.  Additional slotting fees may
      be incurred with a retail customer in the future if additional products are
      sold
      through that retail customer. As we continue to build out our distribution
      network, we anticipate incurring additional slotting fees. We record slotting
      fees as a reduction of gross sales. We currently do not have sufficient funds
      to
      pay the slotting fees necessary to shelve our products with retail customers
      at
      a level necessary to sustain our operations or to generate revenue.





**Results
      of Operations for the six months ended June 30, 2007 compared with the six
      months ended June 30, 2006**





The
      following discussion of the results of operations should be read in conjunction
      with our condensed financial statements and notes thereto for the six months
      ended June 30, 2007 included in this Form 10-QSB.





There
      was
      a slight increase in the cost of products shipped for the six months ended
      June
      30, 2007 as compared to the period ended June 30, 2006. The increase was mainly
      due to a $5,000 addition in product purchases during the period ended June
      30,
      2007 compared to the period ended June 30, 2006. In addition, a significant
      amount of exterior packaging was recycled due to a change in product ingredients
      resulting in an increase in inventory shrink of $2,300.





Our
      other
      operating expenses consisted of:





·
            Sales
                and marketing expenses, which includes shipping costs related to
                manufactured products and advertising
                costs;


·
            spoils
                expenses related to manufactured
                products;


·
            general
                and administrative expenses;


·
            interest
                expense; and


·
            depreciation
                and amortization expense.






-
          16
          -
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          of Contents*





Net
      sales
      for the six months ended June 30, 2007 were $68,372, compared to net sales
      of
      $243,619 in the comparable period in 2006. Net sales consist of sales, net
      of
      discounts, offset by slotting and sales incentive fees. Sales, net of discounts,
      decreased in the six months ended June 30, 2007 to $43,372 from $79,303 in
      the
      comparable period in 2006. This decrease occurred due to a longer than expected
      delay in delivering our products onto the shelves of supermarkets and post
      delivery spoilage costs of approximately $11,800. Slotting fees, which normally
      decrease net sales, resulted in an increase of net sales by $25,000 for the
      six
      months ended June 30, 2007 compared to an increase of $164,316 in the comparable
      period in 2006. The increase for the six months ended June 30, 2007 is due
      to
      the reversal of a prior year adjustment. The increase for the comparable period
      in 2006 was the result of a settlement due to a customer’s inability to provide
      shelf space. Cost of goods sold was $56,934 for the six months ended June 30,
      2007, compared to $55,237 in the comparable period in 2006. The increase in
      cost
      of goods sold was due to decreased sales volume, resulting in the Company’s
      inability to keep costs for products shipped as low as in prior
      periods.





The
      components of cost of goods sold for each period are as follows:





**6/30/2007**
            
            
            **6/30/2006**Fulfillment
            
            
            2,937
            
            
            
            1,381Cost
                of products shipped
            
            
            51,700
            
            
            
            37,570Spoilage
            
            
            2,297
            
            
            
            9,0365Total
                cost of goods sold
            
            
            56,934
            
            
            
            55,237





Operating
      expenses were $1,528,013 for the six months ended June 30, 2007 compared to
      $1,010,150 in the comparable period in 2006. Of this increase, general and
      administrative expenses were $1,241,498 for the six months ended June 30, 2007
      versus $849,978 in the comparable period in 2006. The increase in these expenses
      during the period ended June 30, 2007 is primarily the result of recognizing
      deferred offering costs, additional costs associated with the hiring of new
      sales and office personnel, payment of salaries accrued in 2006 and new costs
      for SEC filings. Also included in our increased operating expenses between
      the
      quarter ended June 30, 2007 and the quarter ended June 30, 2006 was an increase
      in our sales and marketing costs, from $158,111 for the period ended June 30,
      2006 to $232,932 for the period ended June 30, 2007.





This
      increase is primarily the result of our increased marketing and sales efforts
      in
      retail promotions, print and radio ads in 2007. During the period ended June
      30,
      2007, we exerted significant efforts to advertise, market and sell our product,
      including efforts to encourage retail customers to carry the BowWow Breakfast
      brand.





**Liquidity,
      Capital Resources and Going Concern**





For
      the
      six months ended June 30, 2007, the Company incurred a net loss of $1,528,013
      and a negative cash flow from operations of $615,355 as compared to a net loss
      of $896,649 and a negative cash flow from operations of $1,190,411 for the
      corresponding period in 2006. In addition, the Company had a working capital
      deficiency of $3,109,560 and a stockholders’ deficiency of $2,886,101 as of June
      30, 2007, compared to a working capital deficiency of $2,456,364 and a
      stockholders’ deficiency of $1,969,888 as of December 31, 2006. These matters
      raise substantial doubt about our ability to continue as a going
      concern.





Our
      principal sources of liquidity have been sales of equity securities and
      borrowings. To meet our current requirements to operate, the Company is
      currently attempting to undertake the sale of some of its common shares to
      raise
      additional funds. There are currently no commitments or other known sources
      for
      this funding. If these funds are obtained, our principal uses would be to
      complete and fund our operations, to pay for expanded marketing, advertising
      and
      promotional activities, for additional grocery store placement fees (slotting
      allowances) and for working capital purposes, including accounting, audit and
      legal expenses for SEC filings and other matters. As of June 30, 2007, we had
      cash and cash equivalents of zero. Until cash generated from operations is
      sufficient to satisfy our future liquidity requirements, we are investigating
      purchase order and slotting funding from different sources. In addition, we
      will
      be looking to seek additional funds through the issuance of additional equity
      with another round of funding. There are currently no commitments or other
      known
      sources for this funding. If these funds are obtained, it would result in
      additional dilution to our stockholders. Financing may not be available in
      the
      future in amounts or on terms acceptable to us, if at all.





In
      February 2007, the Company engaged in a private placement of common stock,
      in
      which it raised approximately $657,000 during the six months ended June 30,
      2007. The Company issued 3,713,990 shares of common stock in this placement.
      Subsequent to June 30, 2007, the Company raised an additional $20,000 and issued
      an additional 80,000 shares of common stock as part of a private
      placement.





At
      June
      30, 2007, the Company had operating funds of $7,479, and it is in need of
      substantial, immediate funding in order to continue operating. If the Company
      does not receive immediate capital infusions by the beginning of the fourth
      quarter of 2007, the Company will at least have to limit its operations
      severely, and it may not be able to survive.







-
          17
          -
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          of Contents*







**Debt
      Service**





On
      April
      27, 2004, the Company entered into a note payable agreement with an individual
      to borrow $150,000 at 10% interest per annum. The note was payable on April
      27,
      2005. As a condition of entering into the note, the Company was also required
      to
      pay additional fees totaling $50,000 upon maturity of the note. The Company
      considered this amount to be additional interest and, accordingly, recorded
      it
      as an expense using the effective interest method over the term. The Company
      paid $1,000 of interest during the note term and on April 27, 2005 the note
      was amended to require a five-month repayment of all accrued principal and
      interest and an additional $30,000 of fees. The additional fees were also
      accrued as interest expense using the effective interest method. The Company
      made payments aggregating $18,000 during the new term and on September 30,
      2005
      became in default of this obligation. All accrued interest as of September
      30,
      2005 was recorded to reflect the total unpaid principal obligation of $232,000
      at December 31, 2005. Accrued interest in the amount of $38,863 is included
      in
      interest payable at June 30, 2007. The Company made principal payments of
      $10,000 for the six months ended June 30, 2007.





On
      September 15, 2005, the Company commenced a private placement offering of
      convertible notes to raise up to $500,000. Pursuant to this offering, on each
      of
      September 15 and September 29, 2005, the Company issued a convertible debenture
      for $10,000. The September 15 debenture was due on March 15, 2007, and accrued
      interest at an annual rate of six percent, with the interest to be due and
      payable annually in arrears on December 31, 2005, December 31, 2006 and March
      15, 2007.


The
      September 29 debenture was due on March 28, 2007, and accrued interest at an
      annual rate of six percent, with the interest to be due and payable annually
      in
      arrears on December 31, 2005, December 31, 2006 and March 28, 2007. Each note
      holder has the option at any time to convert the principal amount of each note
      into shares of common stock at a conversion price at $0.65 per share. In
      addition, the conversion price is subject to adjustment in the event the Company
      issues additional shares of common stock for less than $0.65 per
      share.  In connection with the issuance of each note, each note holder
      received a warrant to purchase 7,692 shares of common stock at an exercise
      price
      of $1.00 per share. The Company is now in default on these obligations. Accrued
      interest in the amount of $2,147 is included in interest payable at June 30,
      2007.





On
      October 25, 2005, the Company entered into a related party loan with a relative
      of a shareholder in the amount of $50,000. The loan accrues interest at 20%
      per
      annum and is due in a lump sum of principal and accrued interest on maturity.
      The original due date of this note was April 26, 2006, which was
      subsequently extended for 60 days until June 26, 2006. On June 26, 2006, this
      note was extended again for an additional 18 months until December 26, 2007.
      Accrued interest in the amount of $16,795 is included in interest payable at
      June 30, 2007.





On
      August 29, 2006, the Company entered into a related party loan with an
      officer/shareholder in the amount of $25,000. The loan accrues interest at
      15%
      per annum and is due on demand. The Company made payments of $10,000 during
      the
      year ended December 31, 2006. Accrued interest in the amount of $2,185 is
      included in interest payable at June 30, 2007.





During
      the fourth quarter of 2006, the Company entered into related party loans with
      a
      shareholder in the aggregate amount of $400,000. The loans accrue interest
      at
      15% per annum and are due on demand. Accrued interest in the amount of $38,219
      is included in interest payable at June 30, 2007.





On
      December 26, 2006, the Company borrowed additional funds of $25,000 from two
      individuals who became investors in 2007. The loans accrue interest at 15%
      per
      annum and are due December 26, 2007. Accrued interest in the amount of $1,900
      is
      included in interest payable at June 30, 2007.





On
      January 24, 2007, the Company entered into a related party loan with a
      shareholder in the amount of $10,000. The loan accrues interest at 15% per
      annum
      and is due on January 23, 2008. Accrued interest in the amount of $674 is
      included in the interest payable at June 30, 2007.





During
      2006, the Company borrowed additional funds of $62,500 from two unrelated
      individuals to fund current operations. The notes are due on October 13,
      2007 and accrue interest at 15% per annum. The Company made payments of $2,000
      during the year ended December 31, 2006. Accrued interest in the amount of
      $8,124 is included in interest payable at June 30, 2007.





On
      February 21, 2007, the Company borrowed additional funds of $22,500 from an
      unrelated individual to fund current operations. The note, which was due
      March 1, 2007, was paid in full February 27, 2007. The Company issued
      5,000 warrants for this short term loan. During the period ended June 30, 2007,
      two note holders also became investors. As a result, $25,000 in short-term
      notes
      payable at December 31, 2006 was reclassed to short-term notes payable
      related party.





**Historical
      Trends**





*Cash
      Flows from Operating Activities.*We used $615,355 of cash flows from
      operating activities during the six months ended June 30, 2007 compared to
      $1,190,411 in the comparable period in 2006. Cash flows were primarily used
      for
      $15,000 in additional product purchases; recycling exterior packaging due to
      a
      change in product ingredients; $43,295 in prepaid inventory, other assets and
      deposits; sales and marketing expenses of $232,932, which includes shipping
      costs related to manufactured products and advertising costs; $9,142 in spoils
      expenses related to manufactured products; $391,520 in general and
      administrative expenses; and $4,977 in interest expense.





*Cash
      Flows from Investing Activities*. There was no cash flows used or from
      investing activities during the six months ended June 30, 2007 and $8,000 during
      the comparable period in 2006.





*Cash
      Flows from Financing Activities*. Cash provided by financing activities
      totaled $622,834 and $1,198,411 for the six months ended June 30, 2007 and
      June
      30, 2006, respectively. The primary sources of cash for the six months ended
      June 30, 2007 were proceeds from sale of common stock of $657,000.








-
          18
          -
 *Table
          of Contents*






**Capital
      Expenditures**





As
      of
      September 11, 2007, the Company had less than $20,000 in operating funds, and
      it
      is in need of substantial, immediate funding in order to continue operating.
      If
      the Company does not receive immediate capital infusions by the beginning of
      the
      fourth quarter of 2007, the Company will at least have to limit its operations
      severely, and it may not be able to survive. The Company intends to use all
      of
      the capital it receives in the future to complete and fund its operations,
      to
      pay for expanded marketing, advertising and promotional activities, for
      additional grocery store placement fees (slotting allowances) and for working
      capital purposes, including accounting, audit and legal expenses for SEC filings
      and other matters. These items indicate our present estimate of our use of
      any
      capital we raise; however, we may reallocate the proceeds or utilize the
      proceeds for other business purposes. The actual expenditures may vary from
      these estimates because of a number of factors, including whether we obtain
      additional funding, what other obligations we have incurred, the amount of
      sales
      of our products and other matters. The amount of capital that we will need
      in
      the future will depend on many factors, including:





·
            our
                relationship with manufacturers and
                customers;


·
            the
                market acceptance of our products;


·
            the
                levels of promotion and advertising that will be required to launch
                our
                new products and achieve and maintain a competitive position in the
                marketplace;


·
            expansion
                of our business;


·
            price
                discounts on our products to our
                customers;


·
            our
                pursuit of strategic transactions, including acquisitions, joint
                ventures
                and capital investments;


·
            the
                levels of inventory and accounts receivable that we maintain;
                and


·
            our
                entrance into new markets.





The
      Company leases its corporate offices under a non-cancelable operating lease
      expiring May 2010. The Company was unable to make regular lease payments
      for part of 2006 and much of 2005 and was in default of the lease. The Company
      reached an agreement in October 2006 to pay $10,000 bi-weekly until lease
      payments are current. There were no penalties assessed as a result of the
      default, however the Company is charged a monthly late fee, which is immaterial,
      on the lease payments in arrears. Approximately $35,365 of lease payments
      payable is included in accounts payable as of June 30, 2007.





The
      Company leases certain equipment under agreements classified as capital leases.
      The leases were recorded to reflect the present value of the net minimum lease
      payment, at acquisition date, using an interest rate of 16.62%. In
      March 2006, one of the leases was restated with slightly modified terms
      resulting in a reduction of the liability by approximately $9,000. As of June
      30, 2007, the Company has total lease obligations of $98,289.





**New
      Accounting Pronouncements**





References
      to the “FASB,” “SFAS” and “SAB” in this Prospectus refer to the “Financial
      Accounting Standards Board,” “Statement of Financial Accounting Standards,” and
      the “SEC Staff Accounting Bulletin,” respectively.





Effective
      January 1, 2007, the Company adopted FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes (“FIN 48”), an interpretation of
      FASB Statement No. 109, Accounting for Income Taxes.” The Interpretation
      addresses the determination of whether tax benefits claimed or expected to
      be
      claimed on a tax return should be recorded in the financial
      statements.  Under FIN 48, we may recognize the tax benefit from an
      uncertain tax position only if it is more likely than not that the tax position
      will be sustained on examination by the taxing authorities, based on the
      technical merits of the position.





The
      tax
      benefits recognized in the financial statements from such a position should
      be
      measured based on the largest benefit that has a greater than fifty percent
      likelihood of being realized upon ultimate settlement. FIN 48 also provides
      guidance on derecognition, classification, interest and penalties on income
      taxes, account in interim periods and requires increased disclosures. At the
      date of adoption, and as of June 30, 2007, the Company does not have a liability
      for unrecognized tax benefits.





The
      Company files income tax returns in the U.S. federal jurisdiction and various
      states. The Company is subject to U.S. federal or state income tax examinations
      by tax authorities for years after 2006. During the periods open to examination,
      the Company has net operating loss and tax credit carry forwards for U.S.
      federal and state tax purposes that have attributes from closed periods. Since
      these NOLs and tax credit carry forwards may be utilized in future periods,
      they
      remain subject to examination.





The
      Company’s policy is to record interest and penalties on uncertain tax provisions
      as income tax expense. As of June 30, 2007, the Company has no accrued interest
      or penalties related to the uncertain tax positions.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,”
which provides enhanced guidance for using fair value to measure assets and
      liabilities. SFAS No. 157 provides a common definition of fair value and
      establishes a framework to make the measurement of fair value in generally
      accepted accounting principles more consistent and comparable. SFAS No. 157
      also
      requires expanded disclosures to provide information about the extent to which
      fair value is used to measure assets and liabilities, the methods and
      assumptions used to measure fair value, and the effect of fair value measures
      on
      earnings. SFAS No. 157 is effective for financial statements issued in fiscal
      years beginning after November 15, 2007 and to interim periods within those
      fiscal years. The Company is currently in the process of evaluating the effect,
      if any, the adoption of SFAS No. 157 will have on its results of operations,
      financial condition, cash flows or disclosures through June 30,
      2007.





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In
      February 2007, the FASB issued FASB Statement No. 159, “The Fair Value
      Options for Financial Assets and Financial Liabilities, Including an amendment
      of FASB Statement No. 115.” FAS 159, which becomes effective for the Company on
      January 1, 2008, permits companies to choose to measure many financial
      instruments and certain other items at fair value and report unrealized gains
      and losses in earnings. Such accounting is optional and is generally to be
      applied instrument by instrument. The Company does not anticipate that
      elections, if any, of this fair-value option will have a material effect on
      its
      financial condition, results of operations, cash flows or
      disclosures.





In
      December 2006, the FASB issued a Staff Position (“FSP”) on EITF 00-19-2,
“Accounting for Registration Payment Arrangements.”  This FSP
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement, whether issued
      as a separate agreement or included as a provision of a financial instrument
      or
      other agreement, should be separately recognized and measured in accordance
      with
      SFAS No. 5, “Accounting for Contingencies.” If the transfer of consideration
      under a registration payment arrangement is probable and can be reasonably
      estimated at inception, the contingent liability under the registration payment
      arrangement is included in the allocation of proceeds from the related financing
      transaction (or recorded subsequent to the inception of a prior financing
      transaction) using the measurement guidance in SFAS No. 5. This FSP is effective
      immediately for registration payment arrangements and the financial instruments
      subject to those arrangements that are entered into or modified subsequent
      to
      the issuance of the FSP.  For prior arrangements, the FSP is effective
      for financial statements issued for fiscal years beginning after
      December 15, 2006 and interim periods within those years. The Company has
      adopted the FSP and determined that it has no material impact on its financial
      condition, results of operations, cash flows or disclosures through June 30,
      2007.





**Critical
      Accounting Policies and Estimates**





Our
      discussion and analysis of our financial condition and results of operations
      are
      based upon our financial statements, which have been prepared in accordance
      with
      accounting principles generally accepted in the United States of America. The
      preparation of these financial statements requires us to make estimates and
      judgments that affect the reported amount of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amount of revenues and expenses for each
      period.





The
      following represents a summary of our critical accounting policies, defined
      as
      those policies that we believe are: (a) the most important to the portrayal
      of
      our financial condition and results of operations, and (b) that require
      management’s most difficult, subjective or complex judgments, often as a result
      of the need to make estimates about the effects of matters that are inherently
      uncertain.





**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 collectibility
      of our 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. At June 30, 2007,
      the
      Company determined that no allowance for uncollectible accounts is necessary.
      If
      circumstances related to specific customers deteriorate, our estimates of the
      recoverability of receivables associated with those customers could materially
      change.





**Inventories**





Inventories
      consist of raw materials, packaging and supplies and finished goods and are
      valued at the lower of cost (first-in, first-out (FIFO) method) or
      market.





**Revenue
      Recognition, Sales Incentives and Slotting Fees**





In
      accordance with Staff Accounting Bulletin No. 104, Revenue Recognition,
      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.” Under EITF No. 00-14, EITF No. 00-25 and EITF
      No. 01-09, these costs are recorded when revenue is recognized and are
      generally classified as a reduction of revenue. Slotting fees refer to oral
      arrangements under 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 retail grocers to allocate shelf
      space
      for twelve months, we expense the slotting fees at the time orders are first
      shipped to customers. During the period ended December 31, 2006, the
      Company settled with a major customer for previously accrued slotting fees.
      The
      customer had been acquired in December 2005 and after the merger it was
      unable to deliver the shelf space and outlets originally contemplated by the
      original agreement. The previously agreed obligation of $219,535 was adjusted
      due to this change in circumstance. This adjustment was recorded as a reduction
      to slotting fees, resulting in slotting income of $144,535 for the period ended
      June 30, 2006. The Company recorded slotting income of $25,000, rather than
      an
      expense for the six months ended June 30, 2007 due to the reversal of a prior
      year adjustment.





**Spoils
      Costs**





Expenses
      for spoils that are incurred after our products are received by our customers
      are recorded as a reduction in gross sales. Expenses for spoils that are
      incurred while raw materials are stored pending orders are included in costs
      of
      good sold. The Company incurred $11,820 and $24,396 for spoils incurred after
      our products were received by our customers during the six months ended June
      30,
      2007 and 2006, respectively. In addition, the Company incurred $2,297 and $9,036
      for spoils that occurred while our raw materials were stored pending orders
      during the periods ended June 30, 2007 and 2006, respectively. The Company
      regularly evaluates the cost of spoils in relationship to sales to determine
      if
      its allowance is adequate. As of the six months ended June 30, 2007 and 2006,
      the Company had not booked an allowance for these costs.





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**Off-Balance
      Sheet Arrangements**





We
      do not
      have any off balance sheet arrangements.





**Going
      Concern**





The
      report of our independent registered public accountants on our audited financial
      statements for the year December 31, 2006 contains an explanatory paragraph
      regarding our ability to continue as a “going concern.” At that time, we had
      only a limited amount of assets and no capital commitments. Although we raised
      a
      net amount of approximately $677,000 in private placements to accredited
      investors between December 31, 2006 and July 2007, we are still in need of
      substantial immediate funding in order to continue operating, and if we are
      unable to raise significant substantial infusions of capital within the near
      future, the Company will be forced to limit its operations severely, and it
      may
      not be able to survive. Ultimately, our ability to continue to finance our
      operations and research and development efforts, as well as profitability,
      will
      depend on our ability to generate sufficient revenue from the sales of our
      products.





**ITEM
      3. CONTROLS AND PROCEDURES**





This
      Form
      10-QSB Report does not include a report of management's assessment regarding
      internal control over financial reporting or an attestation report of the
      Company's registered public accounting firm due to a transition period
      established by rules of the Securities and Exchange Commission for newly public
      companies.





Our
      Chief
      Executive Officer is responsible for establishing and maintaining disclosure
      controls and procedures for the Company. As required by Securities and Exchange
      Commission Rule 13a-15(b), we carried out an evaluation, under the supervision
      and with the participation of the Company's management, including our Chief
      Executive Officer, of the effectiveness of the design and operation of our
      disclosure controls and procedures as of December 31, 2006. The CEO has
      concluded that the design and operation of the Company's disclosure controls
      and
      procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act
      of
      1934) do not adequately meet intended objectives and are not effective as of
      the
      end of the period covered by this report.  This deficiency consists
      primarily of inadequate staffing and supervision that could lead to the untimely
      identification and resolution of accounting and disclosure matters and failure
      to perform timely and effective reviews. However, the size of the Company
      prevents us from being able to employ sufficient resources to enable us to
      have
      adequate segregation of duties within our internal control system. We understand
      the importance of strong internal controls and procedures and are currently
      in
      the process of developing a plan to address these issues. We intend that the
      basic framework of our plan will encompass the following processes:





**Maintaining
      a strong internal control environment.** Prior to December 31, 2007, we
      intend to design and implement written internal control policies and procedures.
      We will monitor these internal controls through self assessments conducted
      by
      senior management, and if necessary we will take appropriate action to correct
      any identified control deficiencies.





**Executing
      financial stewardship.** We intend to establish and maintain internal
      control polices that will be communicated to all employees to ensure that
      employees understand their fiduciary responsibilities to shareholders. This
      ongoing effort will encompass financial discipline in strategic and daily
      business decisions, and will bring particular focus on the maintenance of
      accurate financial reporting and effective controls through process improvement,
      skill development and oversight.





**Encouraging
      strong and effective corporate governance from our Board of Directors.**
      By December 31, 2008, we intend to establish a board of directors that meets
      applicable independence standards, and we intend to establish an audit committee
      comprised of independent directors with sufficient financial knowledge and
      experience. The Company intends to review significant accounting policies,
      financial reporting and internal control matters with this committee, and will
      encourage this committee to have independent discussions with our external
      auditors.





**Communicating
      expectations to employees**. Every employee will receive a copy of the
      Company’s Employee Handbook (the “Handbook”), which sets forth the Company’s
      commitment to high ethical standards, and every employee will receive training
      regarding the information in the Handbook. All employees will be held
      accountable for compliance with the policies set forth in the Handbook, and
      will
      be informed of the methods through which they can report any perceived
      violations of such policies.





**Changes
      in Internal Control**. We maintain a system of internal controls designed
      to provide reasonable assurance that transactions are executed in accordance
      with management’s general or specific authorization; transactions are recorded
      as necessary to permit preparation of financial statements in conformity with
      Generally Accepted Accounting Principles (“GAAP”) and maintain accountability
      for assets. Access to assets is permitted only in accordance with management’s
      general or specific authorization.





It
      is the
      responsibility of our management to establish and maintain adequate internal
      control over financial reporting. The material weakness identified relates
      to an
      insufficient number of personnel having adequate knowledge, experience and
      training to provide effective oversight and review over our financial close
      and
      reporting process. This is the result of limited financial resources. These
      control deficiencies in the aggregate did not result in any misstatements in
      the
      interim condensed financial statements. Management is in the process of
      remedying the material weakness described above.





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**PART
      II – OTHER INFORMATION**





**ITEM
      2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS**





In
      February 2007, the Company engaged in a private placement of shares of its
      common stock at $.50 per share. The Company raised approximately $357,000 from
      this placement. The Company issued 714,000 shares of common stock in this
      placement. In May 2007, the Company engaged in a private placement of shares
      of
      its common stock at $.10 per share. The Company raised approximately $300,000
      from this placement. The Company issued 3,000,000 shares of common stock in
      this
      placement. In July, 2007, the Company engaged in a private placement of shares
      of its common stock at $.25 per share. The Company raised approximately $116,000
      from this placement. The Company issued 464,000 shares of common stock in this
      placement. These sales were completed in reliance on exemptions from
      registrations under Section 3(b) of the Securities Act and Rule 506 of
      Regulation D promulgated under the Securities Act. This offering qualified
      for exemption from registration because (i) the securities were purchased by
      accredited investors only; (ii) the Company did not engage in any general
      solicitation or advertising to market the securities; (iii) each purchaser
      was
      provided the opportunity to ask questions and receive answers from the Company
      regarding the offering; and (iv) the purchasers received “restricted
      securities.”





**ITEM
      6. EXHIBITS**





The
      following is a complete list of Exhibits filed as part of this periodic
      report.





**Number**
            
            **Description**2.1+
            
            Agreement
                and Plan of Merger of All American Pet Company Inc., a New York
                corporation and All American Pet Company, Inc., a Maryland corporation,
                effective as of January 23, 20063.1+
            
            Certificate
                of Incorporation filed with the New York Secretary of State on February
                14, 20033.2+
            
            Certificate
                of Amendment To The Certificate of Incorporation filed with the New
                York
                Secretary of State on January 26, 20063.3+
            
            Articles
                of Incorporation filed with the State of Maryland Department of
                Assessments and Taxation on January 4, 20063.4+
            
            Articles
                Supplementary filed with the State of Maryland Department of Assessments
                and Taxation on January 11, 20063.5+
            
            Certificate
                of Merger filed with the New York Secretary of State on January 27,
                20063.6+
            
            Articles
                of Merger filed with the State of Maryland Department of Assessments
                and
                Taxation on January 27, 20063.7+
            
            Bylaws4.1
            
            Specimen
                Common Stock Certificate4.2
            
            Specimen
                Series A Preferred Stock Certificate (to be filed at a later
                date)4.3+
            
            Agreement,
                effective November 30, 2005, by and between Nortia
                Capital  Partners,  Inc., a Nevada corporation and All
                American Pet Company Inc., a New York corporation10.1+
            
            Equipment
                Lease Agreement by and between Bev-Lin Enterprises, Inc. and All
                American
                Pet dated March 8, 200610.2+
            
            Form
                of Subscription Agreement10.3+
            
            Letter
                Agreement with L. Phillips Brown10.4+
            
            Lease
                Agreement for rental of office premises dated January 18,
                200510.5*
            
            Lease
                Agreement for rental of warehouse space dated March 6,
                200610.6+
            
            Loan
                Agreement, dated as of April 27, 2004, by and between the Company
                and
                George LaCapra10.7+*
            
            Broker
                Agreement between Crossmark, Inc. and All American Pet Company, Inc.
                dated
                August 1, 200610.8**
            
            Loan
                Agreement dated as of August 29, 2006 by and between the Company
                and Barry
                Schwartz10.9**
            
            Loan
                Agreement dated as of October 10, 2006 by and between the Company
                and
                Eckard Kirsch10.10**
            
            Loan
                Agreement dated as of October 27, 2006 by and between the Company
                and
                Eckard Kirsch10.11**
            
            Loan
                Agreement dated as of November 7, 2006 by and between the Company
                and
                Eckard Kirsch10.12**
            
            Loan
                Agreement dated as of November 21, 2006 by and between the Company
                and
                Eckard Kirsch10.13**
            
            Loan
                Agreement dated as of December 27, 2006 by and between the Company
                and
                Eckard Kirsch31.1
            
            Rule
                13a-14(a) / 15d-14(a) Certifications32.1
            
            Section
                1350 Certifications





+
      Incorporated by reference from the Company's Form SB-2, file number 333-135283,
      filed on June 23, 2006.





*
      Incorporated by reference from the Company's Amendment No. 3 to Form SB-2,
      File
      Number 333-135283, filed on December 28, 2006 **Incorporated by reference from
      the Company's Annual Report filed on Form 10KSB, filed on July 17, 2007.








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**SIGNATURES**








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








**All
      American Pet Company, Inc.**


Registrant








Date:
                September 14, 2007
            By:
            **/s/
                Barry Schwartz**Barry
                SchwartzChief
                Executive Officer, Chief Financial Officer and Principal Accounting
                Officer













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