All American Pet Company Inc (AAPT)

[Mr. Smith]

ITEM 3. LEGAL PROCEEDINGS

The Company was and is involved in various litigations with trade creditors, former employees and professionals. Currently there are ten judgments against the Company in the aggregate amount of approximately $291,010. A media company filed a suit to collect unpaid fees dating from October 30, 2007 of $71,033. The media company was granted a judgment for $71,033 by Los Angeles Superior Court on April 6, 2010, which is still owed by the company. There have been no efforts on the part of the media company to collect the judgment and the Company believes that it will be able to settle the amount for a reduced final payment. A materials handling company was granted a judgment for $3,654 by Superior Court of California on January 18, 2008. There has been no further collection activity on this account. An internet marketing company filed suit against the Company and agreed to arbitration which was settled for $20,000 in October of 2010. There have been no payments made on this settlement. An accounting firm that provided services to the company obtained a judgment through arbitration that was confirmed by the Circuit Court in West Palm Beach for $150,000 on August 25, 2010. The Company has been in negotiations with various payment plans and is expecting to settle the matter for a reduced amount that has not been determined at this time. A public relations firm obtained a judgment in the amount of $44,323 on April 9, 2010 for fees owed for services. There has been no collection activity and the Company is planning to negotiate a reduced settlement of the final balance owed. A videographer filed suit in Small Claims Court in Mercer, New Jersey for $2,000 and received a default judgment in November of 2007. The company has had no contact with the plaintiff in this matter and expects to not pay anything of this judgment amount.

The company has settled a lawsuit with a former employee in the amount of $90,000 plus $2,069 previously settled. The Company is required to make an initial payment of $15,000 on or before April 30, 2011 and 14 monthly installments of $5,357 begining June 1, 2011. As of July 1, 2011, the Company has not made any of the required payments under the terms of the agreement.

A grocery services company filed to substitute attorneys for on its filing to collect $22,000 in fees for advertising services on February 22, 2011. This matter is pending; however the Company believes it will be settled for a nominal amount if anything based on the age of the payable.