SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB/A


         {X}      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
                   -------------------------------------------

                        COMMISSION FILE NUMBER: 000-51160
                        ---------------------------------

                        ACE MARKETING & PROMOTIONS, INC.
                        --------------------------------
             (Exact name of Registrant as specified in its charter)

            NEW YORK                                          11-3427886
--------------------------------------------------------------------------------
(State of jurisdiction of                                 I.R.S. Employee
 incorporation or organization)                           Identification Number)


457 ROCKAWAY AVENUE, VALLEY STREAM, NY                       11581
--------------------------------------------------------------------------------
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code: (516) 256-7766

Securities registered pursuant to Section 12 (b) of the Act:  None
------------------------------------------------------------------


Securities registered pursuant to Section 12 (g) of the Act: Common Stock,
--------------------------------------------------------------------------
$.0001 Par Value
----------------

Check whether the Registrant is not required to file reports pursuant to Section
13 of 15(d) of the Exchange Act. [ ]

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]  No [ ].

Indicate by check mark if disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in part III of this Form 10-KSB
or any amendment to this Form 10-KSB [ ].

Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act. Yes [ ] No [X]

State issuer's revenues for its most recent fiscal year: $3,422,665.

As of March 14, 2006, the number of shares held by non-affiliates was
approximately 2,577,000 shares. The approximate market value based on the last
sale (i.e. $2.00 per share as of March 14, 2006) of the Company's Common Stock
was approximately $5,154,000.

The number of shares outstanding of the Registrant's Common Stock, as of March
14, 2006 was 6,917,108.








                           FORWARD-LOOKING STATEMENTS

         We believe this annual report contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are subject to risks and uncertainties and are based on the
beliefs and assumptions of our management, based on information currently
available to our management. When we use words such as "believes," "expects,"
"anticipates," "intends," "plans," "estimates," "should," "likely" or similar
expressions, we are making forward-looking statements. Forward-looking
statements include information concerning our possible or assumed future results
of operations set forth under "Business" and/or "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

         Forward-looking statements are not guarantees of performance. They
involve risks, uncertainties and assumptions. Our future results and stockholder
values may differ materially from those expressed in the forward-looking
statements. Many of the factors that will determine these results and values are
beyond our ability to control or predict. Stockholders are cautioned not to put
undue reliance on any forward-looking statements. For those statements, we claim
the protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995. For a discussion of some
of the factors that may cause actual results to differ materially from those
suggested by the forward-looking statements, please read carefully the
information under "Risk Factors." In addition to the Risk Factors and other
important factors discussed elsewhere in this annual report, you should
understand that other risks and uncertainties and our public announcements and
filings under the Securities Exchange Act of 1934, as amended could affect our
future results and could cause results to differ materially from those suggested
by the forward-looking statements.

REASON FOR FILING 10-KSB/A

         This Form 10-KSB/A is being filed to amend certain information
contained in Item 5 under "Recent Sales of Unregistered Securities" and in Item
10 in the "Summary Compensation" table and in "Employment Agreements."

                                     PART I
Item 1.  Description of Business
-------  -----------------------

OVERVIEW

         Ace Market & Promotions, Inc. incorporated under laws of the State of
New York in March 1998, is a full service advertising specialties and
promotional products distributor company. We distribute items manufactured by
others to our customers typically with our customers' logos on them. Several of
our customer categories include large corporations, local schools, universities,
financial institutions, hospitals and not-for-profit organizations. Our
promotional products are a useful, practical, informative, entertaining, and/or
decorative item, most often imprinted with the sponsoring advertiser's name,
logo, slogan or message, and typically retained and appreciated by the end
recipients who receive them, in many cases free of charge in marketing and
communication programs.

         Promotional products are also effective for the following:

         o        dealer/distribution programs;
         o        co-op programs;
         o        company stores;
         o        generating new customers or new accounts; o nonprofit
                  fundraising; public awareness campaigns;
         o        promotion of brand awareness and brand loyalty;
         o        employee incentive programs;
         o        new product or service introduction; and
         o        marketing research for survey and focus group participants.

                                       2






                  We have the ability to distribute over 500,000 promotional
         product items ranging from stickers that cost pennies all the way
         through jewelry, sporting goods, awards, and electronics that cost
         thousands of dollars per unit. Specific categories of promotional
         products include:

         o        Advertising Specialties-build awareness, goodwill and
                  remembrance of the advertiser's name, product, purpose,
                  advantages or other timely message. These products are
                  generally lower priced goods and are usually distributed for
                  free.
         o        Business Gifts, Awards and Commemoratives - generally lower
                  priced goods and are given for goodwill, often at trade shows
                  to generate traffic.
         o        Incentives and Awards-focus on motivation, workplace safety,
                  goal setting and recognition. These are typically higher
                  priced items used in incentive programs to promote employee
                  retention and recognition. They may also be used in
                  recruitment programs as well.
         o        Premiums-given after a specific behavior has been performed.

         The most popular products that we have distributed over the last
several years and account for over 50% of our business are as follows:

         o        Wearables, such as t-shirts, golf shirts and hats.
         o        Glassware, such as mugs and drinking glasses.
         o        Writing instruments, such as pens, markers and highlighters.
         o        Bags, such as tote bags, gift bags and brief cases.

COMPANY HISTORY

         We have been in business since 1998. We have grown our business through
internal growth without acquisitions and without us having the benefits of any
trademarks, patents, service marks, franchises, concessions, royalty agreements
or labor contracts. Our growth has been achieved through cash flow from
operations and the private sale of our restricted common stock totaling
approximately $1,130,000. See "Notes to Consolidated Financial Statements" for
additional information on the sale of our common stock during the last two
years.

THE MARKET

         There are thousands of different types and styles of promotional
products. In many cases, it is even possible to obtain custom items that are not
found in any catalog. According to The Counselor - State of the Industry 2005
Survey, which is available online at no cost to the public at
www.thecounselor.net, the most popular promotion products sold in 2004 were the
following:

         o        wearables;
         o        writing instruments;
         o        glassware and ceramics;
         o        desk/office/business accessories;
         o        calendars;
         o        recognition awards/trophies; and
         o        magnets.


                                       3






MARKET SIZE
-----------

         According to the Promotional Products Association International, which
is available online at no cost to the public at
www.ppai.com/MediaInformation/Instustry/Statistics/SalesVolumeEstimates/,
promotional product distributor's sales were $5.13 billion in 1991, with steady
increases in sales until they reached $17.85 billion in 2000. Promotional
Product sales then declined to $16.55 billion in 2001, $15.63 billion in 2002,
increased to $16.34 billion in 2003 and $17.3 billion in 2004. A revitalized
economy, increased competition in the marketplace, and a trend toward integrated
and targeted marketing strategies has contributed to this growth. Integrated
marketing campaigns involve not only advertising, but also sales promotions,
internal communications, public relations, and other disciplines. The objectives
of integrated marketing are to promote products and services, raise employee
awareness, motivate personnel, and increase productivity through a wide array of
methods including extensive use of promotional products.

 DISTRIBUTORS

         According to the Promotional Products Association International, which
is available online at no cost to the public at www.ppai.com/MediaInformation/
Instustry/Statatistics/SalesVolumeEstimates/, with no single company dominating
the market, the promotional products industry is highly fragmented with 20,249
distributors in the industry with revenues of less than $2.5 million and 919
distributors with revenues of $2.5 million or more. According to The Counselor -
State of the Industry 2005 Survey, the top ten distributors in our industry are
believed to have sales of between $137 million and $230 million for 2004.
Wearguard-Crest Co., Halo Branded Solutions/Lee Wayne Corporation, Corporate
Express Promotional Marketing, 4 Imprint Inc. and American Identity are the top
five distributors with 2004 sales of $230 million, $207 million $200 million,
$191.5 million and 179.5 million, respectively. Nearly 80% of the distributors
surveyed are reported to be privately owned family businesses. Management
believes that control of sales lies predominantly with the independent sales
representatives, as there is little brand recognition at this time.

         According to the Promotional Products Association International, which
is available online at no cost to the public at www.ppai.com/ProductsResources/
Research/TopBuyers/, the following ranks the top ten purchasers of promotional
products in descending order according to the findings of a 2003 study by
Louisiana State University and Glenrich Business Studies. Industries were named
by distributors according to the volume spent on promotional products by each
industry.

         o        education: schools, seminars
         o        financial: banks, savings and loans, credit unions, stock
                  brokers
         o        health care: hospitals, nursing homes, clinics
         o        not-for-profit organizations
         o        construction: building trades and building supplies
         o        government: public offices, agencies, political candidates
         o        trade, professional associations and civic clubs
         o        real estate: agents, title companies and appraisers
         o        automotive: manufacturers, dealers, parts suppliers
         o        professionals: doctors, lawyers, cpa's, architects

                                       4






SUPPLY CHAIN

         Domestic and overseas manufacturers generally sell their promotional
product items directly to suppliers. Suppliers sell to distributors like Ace
Marketing and distributors sell promotional products to customer users such as
large corporations, financial institutions, universities and schools, hospitals,
not-for-profit organizations and small businesses. However, manufacturers have
the ability to sell their promotional products directly to distributors and
customers. Suppliers have the ability to sell promotional products directly to
customers who are not distributors.

         Whereas the majority of the items are made overseas, often in China,
and the suppliers are simply importing from actual manufacturers, we generally
consider the supplier as the beginning of the industry supply chain. They choose
specified product lines and import blank goods to be warehoused until a
distributor orders one of their items with a customer logo on it. The suppliers
generally run the risk of inventory exposure and fluctuations in an item's
popularity. This is generally why most distributors stick to distributing and
not importing. There are situations where importing directly from the
manufacturer and thus cutting out the supplier does in fact make sense.
Generally, this happens when a distributor has a large quantity order and has
enough lead time from the customer to import the item. Since ocean freight from
overseas generally takes 30-45 days and manufacturing may take several weeks,
this only makes sense when a customer orders far in advance and in large
quantity. The benefits of this are outstanding since the margins and cost
savings can be substantial. But, in general, the average order in the industry
is below $1,000 and thus the need for individual suppliers to carry specified
product lines and hold inventory to fill the need of the average distributor
with the average order.

Suppliers
---------

         Management believes that while there are an estimated 3,000 suppliers
in the industry, most of the promotional products distributors have access to
the same suppliers. Currently, we utilize approximately 500 suppliers in our
business with only one supplier accounting for about 10% of our purchasing
requirements over the last two years. We seek to distinguish ourselves from
other distributors by attractive pricing, by sourcing unique items, creating
custom products and/or offering superior in house service and customer support
through our employees. Most suppliers require us to pay within 30 days of
delivery of an order; however, we may not receive our customers' payments in the
same time frame. This requires us to have available cash resources to finance
most of our customers' orders. The possible lack of available cash resources
would limit our ability to take orders from customers, thus limiting our ability
to grow. An infusion of additional capital, a line of credit and better payment
terms based on volume can enable us to service a broader base of customers. We
have never sought to establish a line of credit, although we may seek to
establish one with an institutional lender in the future.

Purchasing Trends - Need for Value Added Products and Related Services
----------------------------------------------------------------------

         Price is no longer the sole motivator of purchasing behavior for our
customers. With the availability of similar products from multiple sources,
customers are increasingly looking for distributors who provide a tangible
value-added to their products. As a result, we provide a broad range of products
and related services. Specifically, we provide research and consultancy
services, artwork and design services, and fulfillment services to our
customers. These services are provided in-house by our current employees.
Management believes that by offering these services, we can attempt to attract
new customers.

                                       5






OUR CUSTOMERS

         We presently have over 500 customer accounts ranging from fortune 500
companies to local schools and small businesses. A customer account is a person
or entity who has purchased promotional products from us in the past on a
non-exclusive basis and may or may not purchase from us additional promotional
products in the future. Our customer base grows mainly through business and
personal referrals and the efforts of our sales representatives. Generally our
customers do not actively seek distributors to bid on their projects. There are
many reasons why our customers may work with us over another distributor. The
average buyer first believes that price is the sole issue with the lowest
bidding distributor on a project obtaining the business. Once they gain more
experience and understand the difficulties in processing and fulfilling an order
on time and correctly, they generally analyze the rationale on how they choose a
distributor differently. Although pricing is important to our customers, they
also count on our dependability, creativity and efficiency. Our promotional
products bear their corporate name and are a reflection of their corporate
image. The events they use these items for are of the utmost importance. If they
go with another distributor who gives them run of the mill ideas possibly at a
lower cost, a poor quality product with inferior quality decoration and/or the
goods arrive late, then they quickly realize there should be other factors that
determine which distributor they should be working with. For each of the years
ended December 31, 2005 and 2004, a customer accounted for approximately 15% and
9% of net revenues, respectively. Aggregate revenues from these customers are
dispersed among many different franchises and storefront locations.

SERVICING OUR CUSTOMERS

We have built our business around the concept of reliability, quality,
innovative and custom promotional products at competitive prices while
maintaining a high level of customer service and good relationships with
industry suppliers. Our research licensed software technology, that we purchased
from an outside vendor and is available for licensing to other distributors in
the industry, affords us the ability to locate and purchase industry product in
an efficient manner rather than to have to manually research products through
hundreds of catalogs and/or reference books. Our in-house art capabilities
through our salaried employees make us a "one stop shop" for custom merchandise
and provide our customers with comfort in knowing logo modifications will not
delay valuable production days on tight turn-around projects. Our in-house art
department consists of two employees who work on Apple computers using licensed
software programs such as Illustrator, Photoshop and Quark to create new logos
or manipulate current ones. These logos are then sent to the supplier who
arranges to put them on the product whether internally or through an outside
source in one of the following manners:

         o        silkscreen printing
         o        embroidery
         o        hot stamp
         o        heat transfer
         o        embossing/debossing
         o        engraving

Our reliability stems from our own customized and detailed tracking system that
we structured and implemented to ensure an order is processed correctly and on
time. In general, customers contact us when they have a need for items that have
corporate logos. They provide us with general information that helps us
determine what products to suggest, including the following:

                                       6






         o        The type of event and the targeted audience;
         o        The number of units that are required and the budget; and
         o        The timing of the event and the theme of the event.

         The aforementioned parameters will narrow the field of items suggested
from a broad list of 500,000 to possibly a dozen or less. Once a customer calls
in or e-mails us requesting ideas for an upcoming event, we begin to research
ideas based on their parameters and we use our research software to look up
dozens of products, prepare a competitive analysis between similar products to
find just the right one, send a picture to the customer by email and prepare and
send a quotation to the customer also by email. This provides us an immediate
time saving advantage over other distributors who still do things manually. Many
of these distributors still scan a reference book which is called a register.
They search for a particular product, such as clocks, then find the sub-category
they are interested in, such as plastic, and there they find all the suppliers
who carry the specific item they are looking to purchase. They must then either
cross reference each supplier to find their phone number or web address, or they
can physically pull as many of the catalogs they have on hand and search for the
products that they are interested in and send catalogs with tabbed pages via
regular mail or overnight service. This is an inefficient way to research and
deliver images of products. We are not aware of any statistical information
which allows us to tell the percentages of distributors who use publicly
available licensed research software systems like ours versus the manual way
described above.

         When the customer decides on the product that they would like to order,
the order is processed in our order entry department utilizing our order-entry
software which is available for licensing to anyone in the industry from third
party vendors. The salesperson submits the specifics of the order to our order
entry department where the order is keyed into the system by our employees.
Three parts to each order are printed:

         o        ACKNOWLEDGEMENT This outlines the product ordered along with a
                  description of the product and how the logo will be placed and
                  in what colors. It includes the quantity ordered, the price
                  per piece, total cost, ship to address, and the delivery date.
                  It is sent to our customer via fax along with a hard copy of
                  the artwork that will be used on the order. The order will not
                  move forward until our customer signs off on the
                  acknowledgment and the artwork. No order runs without the sign
                  offs thus protecting us in the long run of a customer claiming
                  they were not aware of some aspect of the order.

         o        PURCHASE ORDER The Purchase order is submitted to the supplier
                  only after the acknowledgment and art are signed by our
                  customer. It contains all the information that the
                  acknowledgment contains except the price of the product is now
                  shown as the price we will be paying. The art is sent via
                  e-mail to the factory and the purchase order requires that the
                  supplier send back a paper proof of the art to insure accuracy
                  before proceeding with the order. Now the supplier has the
                  exact same parameters to complete the order that the customer
                  signed off on. They must meet the delivery date for the
                  quantity specified, with the logo specified, at the price we
                  submitted. Orders are drop shipped from the supplier directly
                  to the customer, except on rare occasions where packaging is
                  done in our office.

         o        SALES ORDER COPY This is a print out that essentially shows
                  all of the components on the acknowledgment and the purchase
                  order combined side by side. It shows what we pay for the
                  product and what price our customer pays for the product. It
                  also shows the gross profit, the gross profit percentage, and
                  the commission due to the salesperson.

                                       7






         Once the above process takes place, the entire work folder goes to the
tracking department. We have developed a system to follow each order from the
time it is processed, through the time it is shipped. This is yet another
safeguard to protect us from a supplier not fulfilling their obligations, which
in turn may lead to us losing money, a customer, or both. The tracking process
consists of us contacting the factory at various points in the production
process to ensure that the order is on schedule. We verbally verify the item,
quantity, and ship date and document who at the supplier verified the
information. We then call again at a certain point in the process to verify it
is on schedule and lastly call on the day of shipping to receive tracking
numbers. The above processes have historically led to eliminating disputes with
both suppliers and customers.

OUR STRATEGY

         Our objective is to be a leading full service advertising specialties
and promotional products company. Key elements of our strategy are:

         o        CREATING AWARENESS OF OUR PRODUCTS, SERVICES AND FACILITIES.
                  We have been in business for over eight years since March
                  1998. Our revenues are derived from existing customers and new
                  customers through word of mouth recommendations, attendance at
                  trade shows, our sales representatives and advertising and
                  promotion in trade journals.

         o        MOTIVATING RETAILERS TO UTILIZE PROMOTIONAL AND SPECIALTY
                  PRODUCTS IN THEIR BUSINESS. It is our management's belief from
                  conversations with persons in our industry and trade show
                  attendance, that a trend in our industry is often for the use
                  of promotional items to customers rather than cash incentives
                  for gaining customer loyalty and motivating sales people. In
                  this regard, customers who received a promotional item tended
                  to purchase more and repeat purchases more often than
                  customers who received a discount coupon of equivalent value.
                  Additionally, sales forces show a tendency for greater
                  motivation when receiving a trip or merchandise as opposed to
                  the cash equivalent. We must show our customers the benefits
                  of utilizing promotional and specialty items in their business
                  and for their sales force and build customer loyalty through
                  the use of point systems that are exchanged for promotional
                  merchandise.

         o        OUR COMPANY WAS BUILT AS A PLATFORM THAT COULD GROW EASILY.
                  Scalability is the key and we have separate departments with
                  defined roles which will allow this to occur and for our
                  salesperson to sell. Our sales persons receive helpful support
                  from us. In many other distributorships, the salesperson is
                  often responsible for everything from answering phones, doing
                  all their own research, processing orders, billing, tracking
                  and collections. At our company, we provide all the backup to
                  allow our sales persons to just sell. Since our technology is
                  currently up to date, including in house servers to allow
                  access to our systems from off-site, we have the ability to
                  pick up salespeople from any location in the United States.

         o        KEY ACQUISITIONS OF SMALL DISTRIBUTORS AND INTEGRATING THEIR
                  WORKFORCE INTO OURS. We will target one or more of the
                  estimated 20,000 small distributors for potential acquisition.
                  However, we can provide no assurances that we will be
                  successful in acquiring any distributors on terms satisfactory
                  to us, if at all.

         o        PROVIDING GENEROUS INCENTIVES TO OUR SALES PEOPLE TO INCREASE
                  PERFORMANCE LEVELS. We offer competitive commissions in
                  addition to back office support and research assistance to
                  allow our independent sales representatives to optimize their
                  sales time and to provide them with adequate incentives to
                  sell promotional products to our customers rather than for our
                  competitors. In the future, we may offer a stock option
                  program for additional incentives.

                                       8






         o        MAINTAIN A COMPETITIVE GROSS PROFIT PERCENTAGE ON ALL SALES
                  ORDERS. In 2005, 2004 and 2003 our gross profit percentage was
                  32.1%, 29% and 31%, respectively. According to The Counselor -
                  State of the Industry 2005 Survey, the average reported gross
                  profit margin for distributors during 2000 through 2004 ranged
                  from 32.5% to 34.3%.

         o        PROVIDE RESEARCH, CONSULTING, DESIGN AND FULFILLMENT SERVICES
                  TO OUR CUSTOMERS TO INCREASE PROFITABILITY. We design
                  promotional products for our customers and provide consulting
                  services in connection therewith. We utilize licensed research
                  software technology and order entry systems that are available
                  to anyone in the industry for license to provide the best
                  services to our customers in the most timely fashion possible.

         o        UTILIZING THE INTERNET AND ITS CAPABILITIES AND OPPORTUNITIES
                  FOR SALES OF PROMOTIONAL PRODUCTS AND COST SAVINGS. Our
                  website is www.Acemarketing.net. Our website is utilized for
                  multiple purposes, including providing information to
                  potential customers who want to learn about us and research
                  our available product line. We also develop online company
                  stores for customers to help facilitate re-orders at cost
                  savings to them based upon a pre-determined product line.

SALES AND MARKETING

         Our revenues are derived from existing customers and new customers
through word of mouth recommendations, attendance at trade shows, our sales
representatives and advertising and promotion in trade journals. Except for two
executive officers, our sales representatives receive commissions and are not
paid a salary. They work at their own location or at our facility and may sell
products on behalf of other companies. We encourage our sales representatives to
sell promotion products for us on the basis of sales incentives which include
competitive commissions and appropriate sales support and research which is
provided in-house by our employees. In the future, we intend to offer stock
and/or stock options as part of their incentive programs.

         Our website is www.Acemarketing.net. Our website is utilized for
multiple purposes, including providing information to potential customers who
want to learn about us and research our available product line.

Technology
----------

         Technology affects most industries, and specifically the internet,
which enables many capabilities and opportunities for cost savings. Sales of
promotional products are often catalog-based. The cost of producing and mailing
a catalog can be high. Placing a catalog on a website takes less manpower to
maintain and less money to update and distribute new versions. Additionally,
integrating the catalog with the order processing system can save time and money
in placing and filling orders, also eliminating manual errors.

         The proliferation of open architecture software and hardware makes an
increasing number of systems available for automating processes and integrating
back office systems. By doing this, we reduce support requirements and further
enhance margins. Additionally, the ability to provide more direct support to our
sales force has led to increased retention of our sales team.

                                       9






POSSIBLE GROWTH THROUGH ACQUISITIONS
------------------------------------

         As a result of the fact that about 20,000 of the estimated 21,000
distributors are doing $2.5 million or less in annual sales in our estimated $16
billion annual industry, we believe the environment for growth and consolidation
in the promotional products industry is appealing, and that we would like to
take advantage of this if a satisfactory opportunity arises. There are some
issues that our company must address to be successful. The main issues are
motivating previous owners, retaining sales people, and integrating operations.

         We have had conversions with the owners of several distributors of
promotional products and have observed that they are open to conversions taking
place for the possible sale of their business.

         We believe that when a distributor is acquired, a decision must be made
about the existing management team, most typically the owner. An evaluation must
be made regarding the skills of the owner and desirability of having them
involved in our company. Acquisitions would be typically made for the customer
accounts; however, due to the size of the target companies, the owner would most
likely also be a key employee or sales person. The motivation of the previous
owner to work for others may be an issue. We must address this issue and ensure
the continued participation of the owners. In general, the best way to mitigate
this risk is to tie up much of the previous owners' payment in stock, thus
providing incentive for the overall company's success.

         We believe that one of the most difficult tasks in our acquiring a
company is transitioning the new acquisition into us. It is important to have
flexible, open systems and technology to integrate the back office operations,
as well as strong controls and processes to put in place. Having the appropriate
technology and strong management team will help alleviate some of the issues
here.

         As of the date hereof, there is no agreement to acquire any other
company or distributor and there can be no assurances given that our plans will
be realized to grow through acquisitions of one or more distributors or, if
successful, that any acquisitions can be profitably integrated into our
company's operations.

Competition
-----------

         While our competition is extensive with over 20,000 distributors, we
believe that there are no companies that dominate the market in which we
operate. Our company competes within the industry on the basis of service,
competitive prices, personnel relationships and competitive commissions to our
sales representatives to sell promotional products for us rather than our
competitors. Competitors' advantages over us may include better financing,
greater experience and better service, cheaper prices and personal relationships
than us.

         According to The Counselor - State of the Industry 2005 Survey, the top
ten distributors in our industry are believed to have sales of between $137
million and $230 million for 2004. Wearguard-Crest Co., Halo Branded
solutions/Lee Wayne Corporation, Corporate Express Promotional Marketing, 4
Imprint Inc. and American Identity are the top five distributors with 2004 sales
of $230 million, $207 million $200 million, $191.5 million and 179.5 million,
respectively. Nearly 80% of the distributors surveyed and reported to be
privately owned family businesses. We can provide no assurances that we will be
able to successfully compete in the future with competitors that have greater
experience and financial assets than us.

                                       10






         We believe that in the promotional products industry, sales people
typically have a large amount of autonomy and control the relationships with
their customers. This works both for and against us. To avoid losing customers,
we must provide the appropriate incentives to keep sales people. At the same
time, while there can be no assurances, management believes our company will be
able to obtain new customers by luring sales people away from competitors. The
offering of stock incentives and health care benefits are ways to retain sales
people, especially in an industry where these types of benefits are rare.

EMPLOYEES

         Our three executive officers are employees of our Company. We also
employ eight other persons, each of whom provide in-house sales and other
services to our Company. During 2005, 15 independent sales representatives
provided multiple service orders for our Company.

RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, IN ADDITION TO THE
OTHER INFORMATION PRESENTED IN THIS FORM 10-KSB, IN EVALUATING US AND OUR
BUSINESS. ANY OF THE FOLLOWING RISKS, AS WELL AS OTHER RISKS AND UNCERTAINTIES,
COULD HARM OUR BUSINESS AND FINANCIAL RESULTS AND CAUSE THE VALUE OF OUR
SECURITIES TO DECLINE, WHICH IN TURN COULD CAUSE YOU TO LOSE ALL OR PART OF YOUR
INVESTMENT.

                         RISKS RELATING TO OUR BUSINESS

THE PROMOTIONAL PRODUCTS DISTRIBUTION INDUSTRY IS HIGHLY COMPETITIVE AND WE MAY
NOT BE ABLE TO COMPETE SUCCESSFULLY.

         We compete with over 20,000 distributor companies. Some of our
competitors have greater financial and other resources than we do which could
allow them to compete more successfully. Most of our promotional products are
available from several sources and our customers tend to have relationships with
several distributors. Competitors could obtain exclusive rights to market
particular products which we would then be unable to market. Industry
consolidation among promotional products distributors, the unavailability of
products, whether due to our inability to gain access to products or
interruptions in supply from manufacturers, or the emergence of new competitors
could also increase competition. In the future, we may be unable to compete
successfully and competitive pressures may reduce our revenues.

WE EXPERIENCE FLUCTUATIONS IN QUARTERLY EARNINGS. AS A RESULT, WE MAY FAIL TO
MEET OR EXCEED THE EXPECTATIONS OF SECURITIES ANALYSTS AND INVESTORS, WHICH
COULD CAUSE OUR STOCK PRICE TO DECLINE.

         Our business has been subject to seasonal and other quarterly
fluctuations. Net sales and operating profits generally have been higher in the
third and fourth quarters, particularly in the months of September through
November, due to the timing of sales of promotional products and year-end
promotions. Net sales and operating profits have been lower in the first
quarter, primarily due to increased sales in the prior two quarters. Quarterly
results may also be adversely affected by a variety of other factors, including:

         o        costs of developing new promotions and services;

         o        costs related to acquisitions of businesses;

         o        The timing and amount of sales and marketing expenditures;

                                       11






         o        general economic conditions, as well as those specific to the
                  promotional product industry; and

         o        our success in establishing additional business relationships.

         Any change in one or more of these or other factors could cause our
annual or quarterly operating results to fluctuate. If our operating results do
not meet market expectations, our stock price may decline in the event a market
should develop.

BECAUSE WE DO NOT MANUFACTURE THE PRODUCTS WE DISTRIBUTE, WE ARE DEPENDENT UPON
THIRD PARTIES FOR THE MANUFACTURE AND SUPPLY OF OUR PRODUCTS.

         We obtain all of our products from third-party suppliers, both
domestically and overseas primarily in China. We submit purchase orders to our
suppliers who are not committed to supply products to us. Therefore, suppliers
may be unable to provide the products we need in the quantities we request.
Because we lack control of the actual production of the products we sell, we may
be subject to delays caused by interruption in production based on conditions
outside of our control. In the event that any of our third-party suppliers were
to become unable or unwilling to continue to provide the products in required
volumes, we would need to identify and obtain acceptable replacement sources on
a timely cost effective basis. There is no guarantee that we will be able to
obtain such alternative sources of supply on a timely basis, if at all. An
extended interruption in the supply of our products would have an adverse effect
on our results of operations, which most likely would adversely affect the value
of our common stock.

WE MAY NOT BE ABLE TO EXPAND THROUGH INTERNAL GROWTH AND MEET CHANGES IN THE
INDUSTRY.

         Our plans for internal growth include hiring in-house sales
representatives from our competitors and offering stock incentives and generous
commissions to keep them. Additionally, we have room for growth by building
direct relationships with advertising agencies and major corporations. Because
of potential industry changes, our products and promotions must continue to
evolve to meet changes in the industry. Our future expansion plans may not be
successful due to competition, competitive pressures and changes in the
industry.

OUR LIMITED CASH RESOURCES AND LACK OF A LINE OF CREDIT MAY RESTRICT OUR
EXPANSION OPPORTUNITIES.

         An economic issue that can limit our growth is lack of extensive cash
resources, due to the typical payment terms of a transaction. Most suppliers
require us to pay within 30 days of delivery of an order; however, we may not
receive our customer's payment in the same time frame. This requires us to have
available cash resources to finance most of our customers' orders. Any lack of
cash resources would limit our ability to take orders from customers, thus
limiting our ability to grow. An infusion of capital and a good line of credit
can enable us to service a broader base of customers. We can provide no
assurances that we will obtain an adequate line of credit in the future, if at
all.

OUR PROPOSED EXPANSION THROUGH ACQUISITIONS INVOLVES SEVERAL RISKS.

     We may expand our domestic markets in part through acquisitions in the
future. Such transactions would involve numerous risks, including possible
adverse effects on our operating results or the market price of our common
stock. Some of our future acquisitions could give rise to an obligation by us to
make contingent payments or to satisfy certain repurchase obligations, which
payments could have an adverse effect on our results of operations. In addition,
integrating acquired businesses:

                                       12






         o        may result in a loss of customers of the acquired businesses;

         o        requires significant management attention; and

         o        may place significant demands on our operations, information
                  systems and financial resources.

         There can be no assurance that our future acquisitions will be
successful. Our ability to successfully effect acquisitions will depend upon the
following:

         o        The availability of suitable acquisition candidates at
                  acceptable prices;

         o        The development of an established market for our common stock;
                  and

         o        The availability of financing on acceptable terms, in the case
                  of non-stock transactions.

OUR REVENUES DEPEND ON OUR RELATIONSHIPS WITH CAPABLE INDEPENDENT SALES
PERSONNEL OVER WHOM WE HAVE NO CONTROL AS WELL AS KEY CUSTOMERS, VENDORS AND
MANUFACTURERS OF THE PRODUCTS WE DISTRIBUTE.

         Our future operating results depend on our ability to maintain
satisfactory relationships with qualified independent Sales personnel as well as
key customers, vendors and manufacturers. We are dependent upon our independent
sales representatives to sell our products and do not have any direct control
over these third parties. If we fail to maintain our existing relationships with
our independent sales representatives, key customers, vendors and manufacturers
or fail to acquire new relationships with such key persons in the future, our
business may suffer.

OUR FUTURE PERFORMANCE IS MATERIALLY DEPENDENT UPON OUR MANAGEMENT AND THEIR
ABILITY TO MANAGE OUR GROWTH.

         Our future success is substantially dependent upon the efforts and
abilities of members of our existing management, particularly Dean L. Julia,
Chief Executive Officer and Michael Trepeta, President. The loss of the services
of Mr. Julia or Mr. Trepeta could have a material adverse effect on our
business. We have a three year employment agreement with each of Mr. Julia and
Mr. Trepeta effective March 1, 2005. However, we lack "key man" life insurance
policies on any of our officers or employees. Competition for additional
qualified management is intense, and we may be unable to attract and retain
additional key personnel. Our management personnel is currently limited and they
may be unable to manage our expansion successfully and the failure to do so
could have a material adverse effect on our business, results of operations and
financial condition.

WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS AND WE MAY NOT BE ABLE TO SECURE
ADDITIONAL FINANCING.

         We may need to raise additional funds in the future to fund more
aggressive expansion of our business or make strategic acquisitions or
investments. We may require additional equity or debt financings or funds from
other sources for these purposes. No assurance can be given that these funds
will be available for us to finance our development on acceptable terms, if at
all. Such additional financings may involve substantial dilution of our
stockholders or may require that we relinquish rights to certain of our
technologies or products. In addition, we may experience operational
difficulties and delays due to working capital restrictions. If adequate funds
are lacking from operations or additional sources of financing, we may have to
delay or scale back our growth plans.

                                       13






               RISKS RELATING TO AN INVESTMENT IN OUR COMMON STOCK

WE LACK AN ESTABLISHED TRADING MARKET FOR OUR COMMON STOCK, AND YOU MAY BE
UNABLE TO SELL YOUR COMMON STOCK AT ATTRACTIVE PRICES OR AT ALL.

         There is currently a limited and sporadic trading market for our common
stock in the OTC electronic bulletin board under the symbol "AMKT." There can be
no assurances given that an established public market will be obtained for our
common stock or that any public market will last. The trading price of the
common stock depends on many factors, including:

         o        The markets for similar securities;

         o        our financial condition, results of operations and prospects;

         o        The publication of earnings estimates or other research
                  reports and speculation in the press or investment community;

         o        Changes in our industry and competition; and

         o        general market and economic conditions.

As a result, we cannot assure you that you will be able to sell your common
stock at attractive prices or at all.

THE MARKET PRICE FOR OUR COMMON STOCK MAY BE HIGHLY VOLATILE.

         The market price for our common stock may be highly volatile. A variety
of factors may have a significant impact on the market price of our common
stock, including:

         o        The publication of earnings estimates or other research
                  reports and speculation in the press or investment community;

         o        Changes in our industry and competitors;

         o        our financial condition, results of operations and prospects;

         o        any future issuances of our common stock, which may include
                  primary offerings for cash, issuances in connection with
                  business acquisitions, and the grant or exercise of stock
                  options from time to time;

         o        general market and economic conditions; and

                                       14






         o        any outbreak or escalation of hostilities, which could cause a
                  recession or downturn in our economy.

         In addition, the markets in general can experience extreme price and
volume fluctuations that can be unrelated or disproportionate to the operating
performance of the companies listed or quoted. Broad market and industry factors
may negatively affect the market price of our common stock, regardless of actual
operating performance. In the past, following periods of volatility in the
market price of a company's securities, securities class action litigation has
often been instituted against companies. This type of litigation, if instituted,
could result in substantial costs and a diversion of management's attention and
resources, which would harm our business.

WE DO NOT ANTICIPATE PAYING CASH DIVIDENDS IN THE FUTURE.

         No cash dividends have been paid by our company on our common stock.
The future payment by us of cash dividends on our common stock, if any, rests
within the discretion of our board of directors and will depend, among other
things, upon our earnings, our capital requirements and our financial condition
as well as other relevant factors. We do not intend to pay cash dividends upon
our common stock for the foreseeable future.

PROVISIONS OF OUR ARTICLES OF INCORPORATION AND AGREEMENTS COULD DELAY OR
PREVENT A CHANGE IN CONTROL OF OUR COMPANY.

         Certain provisions of our articles of incorporation may discourage,
delay, or prevent a merger or acquisition that a shareholder may consider
favorable. These provisions include:

         o        Authority of the board of directors to issue preferred stock.
         o        Prohibition on cumulative voting in the election of directors.

WE LACK INDEPENDENT DIRECTORS AND COMMITTEES THEREOF.

         The Sarbanes-Oxley Act of 2002 requires us as a public corporation to
have an audit committee composed solely of independent directors. Currently, we
have no independent directors or committees of directors. Without independent
directors, our board may have no way to resolve conflicts of interest,
including, without limitation, executive compensation, employment contracts and
the like.

OUR FUTURE SALES OF COMMON STOCK BY MANAGEMENT AND OTHER STOCKHOLDERS MAY HAVE
AN ADVERSE EFFECT ON THE THEN PREVAILING MARKET PRICE OF OUR COMMON STOCK.

         In the event a public market for our common stock is sustained in the
future, sales of our common stock may be made by management and other
stockholders pursuant to and in compliance with the provisions of Rule 144 of
the Securities Act of 1933. In general, under Rule 144, a person who has
satisfied a one-year holding period may, under certain circumstances, sell
within any three-month period a number of shares which does not exceed the
greater of one percent of the then outstanding shares of common stock or the
average weekly trading volume in shares during the four calendar weeks
immediately prior to such sale. Rule 144 also permits under certain
circumstances, the sale of shares without any quantity or other limitation by a
person who is not an affiliate of our company and who has satisfied a two-year
holding period. Future sales of shares of our common stock made under Rule 144
may have an adverse effect on the then prevailing market price, if any, of our
common stock.

                                       15






Item 2.  Description of Property
--------------------------------

         Our principal executive offices are located at 457 Rockaway Avenue,
Valley Stream, NY 11581. We currently lease approximately 4,000 square feet of
office space at this facility at an annual cost of approximately $57,000
pursuant to a month-to-month lease. We are currently exploring our options of
obtaining a new location and/or entering into a long-term lease at our current
facility. We also lease approximately 1,000 square feet of space at an annual
cost of approximately $15,000 at 1105 Portion Road, Farmingville, NY 11738.

Item 3.  Legal Proceedings
--------------------------

         We are currently not subject to any threatened or pending legal
proceedings. Nevertheless, we may from time to time become a party to various
legal proceedings arising in the ordinary course of our business.

Item 4.  Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------

         No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 2005.


                                       16






                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.
------------------------------------------------------------------

         Since June 9, 2005, our common stock has been traded on the OTC
Bulletin Board under the symbol "AMKT." Our common stock trades on a limited
basis on the OTC Electronic Bulletin Board in the Over-the-Counter Market. The
following table sets forth the range of high and low closing sales prices of our
Common Stock for the periods indicated (it being understood that prices for the
quarter ended June 30, 2005 are for the period June 9 through June 30, 2005).

         Quarters Ended                                High       Low
         --------------------------------------------------------------

         June 30, 2005............................    $ 3.50     $ .50
         September 30, 2005.......................      2.00       .50
         December 31, 2005........................      2.00       .57

         The closing sales price on March 14, 2006 was $2.00 per share. All
quotations provided herein reflect inter-dealer prices, without retail mark-up,
markdown or commissions.

         All of our restricted common stock may be eligible for sale in
compliance with Rule 144 of the Securities Act of 1933, as amended. Rule 144
provides among other things and subject to certain limitations that a person
holding restricted securities for a period of one year may sell those securities
in brokerage transactions every 90 days in an amount equal to the greater of the
average weekly trading volume over the four preceding weeks or 1% of our
company's outstanding common stock. Persons who have owned our restricted common
stock for a period of at least two years and are not affiliates of our company
may sell or otherwise transfer their common shares pursuant to Rule 144(k) of
the Securities Act. Possible or actual sales of our company's common stock under
Rule 144 may have a depressive effect upon the price of our common stock if any
meaningful market were to develop for our common stock in the future.

         Currently, we have outstanding warrants to purchase 837,000 shares of
our common stock at a price of $2.00 per share. In the event that all of the
warrants are exercised, of which there can be no assurances given, an additional
837,000 shares of restricted common stock will be issued and may be resold
pursuant to Rule 144 after a holding period of at least one year, unless we
elect to voluntarily register the resale of the shares issuable upon exercise of
the warrants for earlier sale. No registration rights were granted in connection
with the issuance of said warrants.

         As of March 14, 2006, there were approximately 50 holders of record of
our common stock, although we believe that there are other persons who are
beneficial owners of our common stock held in street name. The Company's
transfer agent is Continental Stock Transfer & Trust Company, 17 Battery Place,
8th Floor, New York, NY 10004.

DIVIDEND POLICY
---------------

         We have never paid any cash dividends and intend, for the foreseeable
future, to retain any future earnings for the development of our business. Our
Board of Directors will determine our future dividend policy on the basis of
various factors, including our results of operations, financial condition,
capital requirements and investment opportunities.

                                       17






RECENT SALES OF UNREGISTERED SECURITIES

         During the year ended December 31, 2005, the Company had no sales or
issuances of unregistered common stock, except we made sales or issuances of
unregistered securities listed in the table below:


     
-------------- ----------------- --------------- ------------------------- ------------------- -----------------------
                                                 CONSIDERATION RECEIVED
                                                 AND DESCRIPTION OF
                                                 UNDERWRITING OR OTHER
                                                 DISCOUNTS TO MARKET                           IF OPTION, WARRANT OR
                                                 PRICE OR CONVERTIBLE      EXEMPTION FROM      CONVERTIBLE SECURITY,
               TITLE OF                          SECURITY, AFFORDED TO     REGISTRATION        TERMS OF EXERCISE OR
DATE OF SALE   SECURITY          NUMBER SOLD     PURCHASERS                CLAIMED             CONVERSION
-------------- ----------------- --------------- ------------------------- ------------------- -----------------------
Jan. 2005      Common Stock      600,000         For services rendered -   Section 4(2) -      Options exercisable
               Options           Options         no other consideration    granted to          at $1.00 per share;
                                                 received; no              officers,           immediately
                                                 commissions paid.         directors and       exer-cisable; expire
                                                                           legal counsel       Jan. 2015; contain
                                                                           under our 2005      cashless exercise
                                                                           Incentive Plan.     provisions.
                                                                           Each grantee is a
                                                                           sophisticated
                                                                           investor, who
                                                                           re-ceived the
                                                                           options with a
                                                                           restrictive
                                                                           legend in
                                                                           con-nection with
                                                                           services rendered
                                                                           and is able to
                                                                           fend for himself.
                                                                           A Form S-8
                                                                           Registration
                                                                           Statement was
                                                                           later filed with
                                                                           the Commission
                                                                           in April and
                                                                           September 2005.
-------------- ----------------- --------------- ------------------------- ------------------- -----------------------
Jan. -Feb.     Common Stock      100,000         $100,000 received; no     Rule 506 of         Class B Warrants
2005           and Class B       Shares and      commissions paid; no      Regulation D; a     exercisable at $2.00
               Warrants          Class B         placement agent was       Form D was filed    per share through
                                 Warrants        utilized.                 on February 22,     Jan. 2, 2008.
                                                                           2005; securities
                                                                           sold to two
                                                                           accredited
                                                                           investors only.
-------------- ----------------- --------------- ------------------------- ------------------- -----------------------
Jan. 2005      Common Stock      31,076 Shares   Conversion of $31,076     Section 3a(9); no   Not Applicable.
                                                 of debt; no commissions   commissions paid.
                                                 paid; no placement
                                                 agent was utilized.
-------------- ----------------- --------------- ------------------------- ------------------- -----------------------

June 2005      Warrants         1,100,000 Shares Services rendered; no     Section 4(2); no    Five year warrants,
                                                 commissions paid; no      commissions paid.   contain cashless
                                                 placement agent was                           exercise provisions
                                                 utilized.                                     and are exercisable at
                                                                                               $.10 per share.
-------------- ----------------- --------------- ------------------------- ------------------- -----------------------
August 2005    Warrants         100,000 Shares   Services rendered; no     Section 4(2); no    Five year warrants,
                                                 commissions paid; no      commissions paid.   contain cashless
                                                 placement agent was                           exercise provisions
                                                 utilized.                                     and are exercisable at
                                                                                               $2.50 per share.
-------------- ----------------- --------------- ------------------------- ------------------- -----------------------


                                       18






         The Company currently has outstanding Class A Warrants to purchase
737,000 shares of Common Stock exercisable at $2.00 per share. The Class A
Warrants which were originally scheduled to expire on January 2, 2006 have been
extended through July 1, 2006.


RECENT REPURCHASES OF SECURITIES
--------------------------------


         During the year ended December 31, 2005, the Company had no repurchases
of its common stock.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations
-------------

         The following discussion should be read in conjunction with our
financial statements and the notes thereto appearing elsewhere in this Form
10-KSB. All statements contained herein that are not historical facts,
including, but not limited to, statements regarding anticipated future capital
requirements, our future plan of operations, our ability to obtain debt, equity
or other financing, and our ability to generate cash from operations, are based
on current expectations. These statements are forward-looking in nature and
involve a number of risks and uncertainties that may cause the Company's actual
results in future periods to differ materially from forecasted results.

CRITICAL ACCOUNTING POLICIES
----------------------------

         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 generally accepted accounting principles in the United States.
The preparation of financial statements require management to make estimates and
disclosures on the date of the financial statements. On an on-going basis, we
evaluate our estimates including, but not limited to, those related to revenue
recognition. We use authoritative pronouncements, historical experience and
other assumptions as the basis for making judgments. Actual results could differ
from those estimates. We believe that the following critical accounting policies
affect our more significant judgments and estimates in the preparation of our
financial statements.

         REVENUE RECOGNITION. Revenues are recognized when title and risk of
loss transfers to the customer and the earnings process is complete. In general,
title passes to our customers upon the customer's receipt of the merchandise.
Revenue is accounted for in accordance with Emerging Issue Task Force Issue No.
99-19, reporting revenue gross as a principal versus net as an agent. Revenue is
recognized on a gross basis since our company has the risks and rewards of
ownership, latitude in selection of vendors and pricing, and bears all credit
risk. Our company records all shipping and handling fees billed to customers as
revenues, and related costs as cost of goods sold, when incurred, in accordance
with Emerging Issue Task Force Issue No. 00-10, accounting for shipping and
handling fees and costs.

         ALLOWANCE FOR DOUBTFUL ACCOUNTS. We are required to make judgments
based on historical experience and future expectations, as to the realizability
of our accounts receivable. We make these assessments based on the following
factors: (a) historical experience, (b) customer concentrations, customer credit
worthiness, (d) current economic conditions, and (e) changes in customer payment
terms.

         STOCK BASED COMPENSATION. The Company accounts for employee stock
compensation in accordance with APB Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations in accounting for its plans and does
not recognize compensation expense for its employee stock-based compensation
plans. The Company has adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123). The Company has also


                                       19






adopted the disclosure provisions of SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." This pronouncement requires prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reporting results.

         In December 2004, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 123(R),
"Accounting for Stock-Based Compensation." SFAS No. 123(R) establishes standards
for the accounting for transactions in which an entity exchanges its equity
instruments for goods or services. This statement focuses primarily on
accounting for transactions in which an entity obtains employee services in
share-based payment transactions. SFAS No. 123(R) requires that the fair value
of such equity instruments be recognized as an expense in the historical
financial statements as services are performed. Prior to SFAS No. 123(R), only
certain pro forma disclosures of fair value were required. The provisions of
this statement are effective for the first interim reporting period that begins
after December 15, 2005. The Company will adopt the provisions of SFAS No.123(R)
in the first quarter of Fiscal 2006. Reference is made to the Notes to Financial
Statements for a description of certain other recently issued accounting
pronouncements.

 OVERVIEW

         We are a full service advertising specialties and promotional products
company. Specific categories of the use of promotional products include
advertising specialties, business gifts, incentives and awards, and premiums.
Through the services of our in-house sales persons and the use of independent
sales representatives, we distribute items to our customers typically with their
logos on them. Several of our customer categories include large corporations,
local schools, universities, financial institutions, hospitals and
not-for-profit organizations.

         The most popular products that we have distributed over the last
several years and account for over 50% of our business are as follows:

         o        Wearables, such as t-shirts, golf shirts and hats.
         o        Glassware, such as mugs and drinking glasses.
         o        Writing instruments, such as pens, markers and highlighters.
         o        Bags, such as tote bags, gift bags and brief cases.

         There are a number of trends in the advertising/marketing industry, the
most significant of which is the trend toward integrated marketing strategies.
Integrated marketing campaigns involve not only advertising, but also sales
promotions, internal communications, public relations, and other disciplines.
The objectives of integrated marketing are to promote products and services,
raise employee awareness, motivate personnel, and increase productivity through
a wide array of methods including extensive use of promotional products.

         Price is no longer the sole motivator of purchasing behavior for our
customers. With the availability of similar products from multiple sources,
customers are increasingly looking for distributors who provide a tangible
value-added to their products. As a result, we provide a broad range of products
and related services. Specifically, we provide research and consultancy
services, artwork and design services, and fulfillment services to our
customers. These services are provided in-house by our current employees.
Management believes that by offering these services, we can attempt to attract
new customers.

                                       20






         Our revenues are expected by us to grow as economic conditions in the
United States continue to improve, by adding additional in-house and independent
sales representatives to our sales network. While one or more acquisitions of
other distributors will also be considered by Management, we can provide no
assurances that one or more acquisitions of other distributors will be completed
on terms satisfactory to us, if at all.

Results of Operations
---------------------

         The following table sets forth certain selected audited condensed
statement of operations data for the periods indicated in dollars and as a
percentage of total net revenues. The following discussion relates to our
results of operations for the periods noted and is not necessarily indicative of
the results expected for any future fiscal year. In addition, we note that the
period-to-period comparison may not be indicative of future performance.

                                                 Year Ended December 31
                                                 ----------------------
                                               2005                   2004
                                               ----                   ----
Revenue                               $       3,422,665       $       2,379,186
Cost of Revenues                              2,324,185               1,688,248
Gross Profit                                  1,098,480                 690,938
Operating Expenses                            1,776,710                 844,574
(Loss) from operations                         (678,230)               (153,636)
Net (Loss)                            $        (682,538)      $        (157,150)
Net (Loss) per common Share           $            (.12)      $            (.03)
Weighted average common Shares
Outstanding                                   5,880,531               5,426,389

         We generated revenues of $3,422,665 for 2005 compared to $2,379,186 for
fiscal 2004. The 44% increase in revenues of $1,043,479 in 2005 compared to 2004
is primarily due to our utilizing additional in-house and independent sales
representatives to obtain additional customers.

         Gross profit was $1,098,480 for 2005 or 32.1% of net revenues compared
to $690,938 or 29.0% for fiscal 2004. Gross profits will vary period-to-period
depending upon a number of factors including the mix of items sold, pricing of
the items and the volume of product sold. Also, it is our practice to pass
freight costs associated with shipping of merchandise to our customers which are
included in costs of revenues and net revenue. Reimbursement of freight costs
have lower profit margins than sales of our promotional products and has the
effect of reducing our overall gross profit margin on sales of products,
particularly on smaller orders. The change in gross profit percentage for fiscal
2005 relates to the mix of product sold and size of orders.

         Operating expenses consisting of selling, general, and administrative
expenses were $1,776,710 for fiscal 2005 compared to $844,574 for fiscal 2004.
Operating costs as a percentage of net revenue was 51.9% for 2005 compared to
35.5% for 2004. Operating expenses in 2005 increased over 2004 primarily due to
the following reasons:

         o        A non-recurring and non-cash charge to operations of $451,000
                  in the second quarter of 2005 relating to the grant of
                  warrants to purchase 1,100,000 shares at an exercise price of
                  $.10 per share to a financial advisor with cashless exercise
                  provisions, which warrants were exercised as of February 27,
                  2006 and resulted in the issuance of 1,029,032 shares as of
                  that date.

                                       21






         o        Commencing in March 2005, a $2,000 per month increase in
                  salary of each of our President and Chief Executive Officer
                  totaling $40,000 for 2005 and the hiring of a Chief Financial
                  Officer at an annual cost of $50,000.
         o        Directors and officers liability insurance at a cost of
                  $26,000.
         o        Professional and other fees relating to being a publicly held
                  corporation totaling approximately $124,000 for 2005.
         o        A non-cash charge of $34,421 to operations relating to the
                  grant of options to consultants of our Company.

         Our net loss was $(682,538) for 2005 as compared to $(157,150) for
2004. Our 2005 increase in net loss relates primarily to non-cash charges
incurred in operations during 2005 totaling $489,421 relating to the granting of
options and warrants to consultants and advisors.

Liquidity and Capital Resources
-------------------------------

         At December 31, 2005, we had cash and cash equivalents of $398,235. We
consider highly liquid debt instruments with a maturity of three months or less,
as well as bank money market accounts, to be cash equivalents.

         During 2005, net cash was used in operating activities of $252,040.
This was primarily due to net loss of $682,538 and an increase in accounts
receivable of $408,452, partially offset by a non-cash stock-based compensation
charge of $489,421 and increases in liabilities and customer deposits of
$211,171 and $98,000, respectively. During 2005, net cash of $11,010 was used in
investing activities to purchase property and equipment. During 2005, net cash
of $95,000 was provided from financing activities due to the sale of our common
stock and warrants. During 2004, net cash was used in operating activities of
$171,068. This was primarily due to our net loss of $157,150 and decreases in
accounts payable and accrued expenses of $9,750. During 2004, cash was used in
investing activities to purchase property and equipment of $14,273. During 2004,
net cash of $696,901 was provided by financing activities from the proceeds of
sale of our common stock and warrants totaling $713,201 less payments on notes
payable of $16,300.

         Our company commenced operations in 1998 and was initially funded by
our three founders, each of whom has made demand loans to our Company that have
been repaid. Since 1999, we have relied on equity financing and borrowings from
outside investors to supplement our cash flow from operations. All past
borrowings from outside investors have been repaid or converted into our
company's common stock. We raised net proceeds of $95,000 from the sale of our
common stock and warrants to purchase additional common stock in the first
quarter of 2005 and we raised net proceeds of $713,201 from the sale of our
common stock and warrants in 2004.

         We anticipate that our future liquidity requirements will arise from
the need to finance our accounts receivable and inventories, hire additional
sales persons, capital expenditures and possible acquisitions. The primary
sources of funding for such requirements will be cash generated from operations,
raising additional capital from the sale of equity or other securities and
borrowings under debt facilities which currently do not exist. We believe that
we can generate sufficient cash flow from these sources to fund our operations
for at least the next fifteen months.

                                       22






Item 7.  Financial Statements
-----------------------------

         The report of the Independent Accountants, Financial Statements and
Schedules are set forth beginning on page F-1 of this Annual Report on Form
10-KSB, following this page.






                                       23















                                                                 ACE MARKETING &
                                                                PROMOTIONS, INC.
--------------------------------------------------------------------------------
                                        REPORT ON AUDITS OF FINANCIAL STATEMENTS

                                          YEARS ENDED DECEMBER 31, 2005 AND 2004






                                       i







                                                                 ACE MARKETING &
                                                                PROMOTIONS, INC.


CONTENTS
================================================================================
YEARS ENDED DECEMBER 31, 2005 AND 2004
--------------------------------------------------------------------------------


FINANCIAL STATEMENTS

  Report of Independent Registered Public Accounting Firm             F-1

  Balance Sheets                                                      F-2

  Statements of Operations                                            F-3

  Statement of Stockholders' Equity                                   F-4

  Statements of Cash Flows                                            F-5

  Notes to Financial Statements                                   F-6 - F-13


                                       ii








REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders
Ace Marketing & Promotions, Inc.

We have audited the accompanying balance sheets of Ace Marketing & Promotions,
Inc. for the years ended December 31, 2005 and 2004, and the related statements
of operations, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ace Marketing & Promotions,
Inc. as of December 31, 2005 and 2004 and the results of its operations and its
cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.



HOLTZ RUBENSTEIN REMINICK LLP

Melville, New York
March 1, 2006


                                      F-1






     

                                                                                       ACE MARKETING &
                                                                                      PROMOTIONS, INC.

BALANCE SHEETS
=======================================================================================================
DECEMBER 31,                                                              2005               2004
-------------------------------------------------------------------------------------------------------

ASSETS

Current Assets:
  Cash and cash equivalents                                            $   398,235       $   566,285
  Accounts receivable, net of allowance for doubtful accounts of
    $10,000 and $0 at December 31, 2005 and 2004, respectively             711,056           312,604
  Prepaid expenses and other current assets                                 41,282            68,407
                                                                       ------------------------------
Total Current Assets                                                     1,150,573           947,296

Property and Equipment, net                                                 21,100            15,680

Other Assets                                                                 5,492             3,135
                                                                       ------------------------------
Total Assets                                                           $ 1,177,165       $   966,111
                                                                       ==============================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Note payable                                                         $        --       $    25,000
  Accounts payable                                                         355,475           183,653
  Accrued expenses                                                         125,485            92,212
  Customer deposits                                                         98,000                --
                                                                       ------------------------------
Total Current Liabilities                                                  578,960           300,865
                                                                       ------------------------------

Commitments and Contingencies

Stockholders' Equity:
  Preferred stock, $.0001 par value; 5,000,000 shares authorized;
    none issued                                                                 --                --
  Common stock, $.0001 par value; 25,000,000 shares authorized;
    5,888,076 and 5,757,000 shares issued and outstanding
    at December 31, 2005 and 2004, respectively                                589               576
  Additional paid-in capital                                             1,646,109         1,030,625
  Accumulated deficit                                                   (1,048,493)         (365,955)
                                                                       ------------------------------
Total Stockholders' Equity                                                 598,205           665,246
                                                                       ------------------------------
Total Liabilities and Stockholders' Equity                             $ 1,177,165       $   966,111
                                                                       ==============================


-----------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.                                                                F-2







                                                                                                ACE MARKETING &
                                                                                               PROMOTIONS, INC.

STATEMENTS OF OPERATIONS
================================================================================================================
YEARS ENDED DECEMBER 31,                                                             2005              2004
----------------------------------------------------------------------------------------------------------------

Revenue, net                                                                      $ 3,422,665       $ 2,379,186
Cost of Revenue                                                                     2,324,185         1,688,248
                                                                                  ------------------------------
Gross Profit                                                                        1,098,480           690,938
                                                                                  ------------------------------

Operating Expenses:
  Selling (including stock based compensation of $17,533 and $0 for
    the years ended December 31, 2005 and 2004, respectively)                         461,233           292,034
  General and administrative (including stock based compensation of $471,888
    and $0 for the years ended December 31, 2005 and 2004, respectively)            1,315,477           552,540
                                                                                  ------------------------------
Total Operating Expenses                                                            1,776,710           844,574
                                                                                  ------------------------------

Loss from Operations                                                                 (678,230)         (153,636)
                                                                                  ------------------------------

Other Income (Expense):
  Interest expense                                                                     (4,532)           (3,609)
  Interest income                                                                         224                95
                                                                                  ------------------------------
Total Other Expenses                                                                   (4,308)           (3,514)
                                                                                  ------------------------------

Net Loss                                                                          $  (682,538)      $  (157,150)
                                                                                  ==============================

Net Loss Per Common Share:
  Basic                                                                           $     (0.12)      $     (0.03)
                                                                                  ==============================

  Diluted                                                                         $     (0.12)      $     (0.03)
                                                                                  ==============================

Weighted Average Common Shares Outstanding:
  Basic                                                                             5,880,531         5,426,389
                                                                                  ==============================

  Diluted                                                                           5,880,531         5,426,389
                                                                                  ==============================


----------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.                                                                           F-3







                                                                                                            ACE MARKETING &
                                                                                                            PROMOTIONS, INC.

Statement of Stockholders' Equity
============================================================================================================================
YEARS ENDED DECEMBER 31, 2005 AND 2004
----------------------------------------------------------------------------------------------------------------------------


                                                 Total                Common Stock             Additional
                                             Stockholders'    ---------------------------        Paid-in
                                                Equity           Shares           Amount         Capital          (Deficit)
                                           ----------------------------------------------------------------------------------
Balance, January 1, 2004                    $   109,195         5,020,000      $       502      $   317,498      $  (208,805)
Securities Issued to Private
  Placement Investors, net                      713,201           737,000               74          713,127               --
Net Loss                                       (157,150)               --               --               --         (157,150)
                                            ---------------------------------------------------------------------------------
Balance at, December 31, 2004                   665,246         5,757,000              576        1,030,625         (365,955)
Conversion of Note Payable                       31,076            31,076                3           31,073               --
Securities Issued to Private
  Placement Investors, net                       95,000           100,000               10           94,990               --
Issuance of Stock Purchase Warrants
  for Services                                  455,000                --               --          455,000               --
Issuance of Stock Options for Services           34,421                --               --           34,421               --
Net Loss                                       (682,538)               --               --               --         (682,538)
                                            ---------------------------------------------------------------------------------
Balance at, December 31, 2005               $   598,205         5,888,076      $       589      $ 1,646,109      $(1,048,493)
                                            =================================================================================


-----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.                                                                                        F-4








                                                                      ACE MARKETING &
                                                                     PROMOTIONS, INC.

STATEMENTS OF CASH FLOWS
=====================================================================================
YEARS ENDED DECEMBER 31,                                      2005            2004
-------------------------------------------------------------------------------------

Cash Flows from Operating Activities:
  Net Loss                                                 $(682,538)      $(157,150)
                                                           --------------------------
  Adjustments to reconcile net loss to
    net cash used in operating activities:
      Depreciation and amortization                            5,590           6,019
      Allowance for doubtful accounts                         10,000              --
      Stock-based compensation                               489,421              --
      Changes in operating assets and liabilities:
        (Increase) decrease in operating assets:
          Accounts receivable                               (408,452)         (5,901)
          Prepaid expenses and other assets                   24,768          (4,286)
        (Decrease) increase in operating liabilities:
          Accounts payable and accrued expenses              211,171          (9,750)
          Customer deposits                                   98,000              --
                                                           --------------------------
  Total adjustments                                          430,498         (13,918)
                                                           --------------------------
Net Cash Used in Operating Activities                       (252,040)       (171,068)
                                                           --------------------------

Cash Flows from Investing Activities:
  Acquisition of property and equipment                      (11,010)        (14,273)
                                                           --------------------------
Net Cash Used in Investing Activities                        (11,010)        (14,273)
                                                           --------------------------

Cash Flows from Financing Activities:
  Proceeds from private placement                             95,000         713,201
  Payments on note payable                                        --         (16,300)
                                                           --------------------------
Net Cash Provided by Financing Activities                     95,000         696,901
                                                           --------------------------

Net (Decrease) Increase in Cash and Cash Equivalents        (168,050)        511,560
Cash and Cash Equivalents, beginning of year                 566,285          54,725
                                                           --------------------------
Cash and Cash Equivalents, end of year                     $ 398,235       $ 566,285
                                                           ==========================


-------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.                                                F-5







                                                                 ACE MARKETING &
                                                                PROMOTIONS, INC.

NOTES TO FINANCIAL STATEMENTS
================================================================================
YEARS ENDED DECEMBER 31, 2005 AND 2004
--------------------------------------------------------------------------------

     1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         NATURE OF OPERATIONS - Ace Marketing & Promotions, Inc. (the "Company")
         is a full service advertising specialties and promotional products
         company that distributes items typically with logos to large
         corporations, schools and universities, financial institutions and
         not-for-profit organizations. Specific categories of promotional
         products include advertising specialties, business gifts, incentives
         and awards, and premiums.

         REVENUE RECOGNITION - Revenue is recognized when title and risk of loss
         transfers to the customer and the earnings process is complete. In
         general, title passes to our customers upon the customer's receipt of
         the merchandise. Revenue is accounted for in accordance with Emerging
         Issue Task Force (EITF) Issue No. 99-19, "Reporting Revenue Gross as a
         Principal versus Net as an Agent". Revenue is recognized on a gross
         basis since the Company has the risks and rewards of ownership,
         latitude in selection of vendors and pricing, and bears all credit
         risk. Advance payments made by customers are included in customer
         deposits.

         The Company records all shipping and handling fees billed to customers
         as revenues, and related costs as cost of goods sold, when incurred, in
         accordance with EITF 00-10, "Accounting for Shipping and Handling Fees
         and Costs".

         ALLOWANCE FOR DOUBTFUL ACCOUNTS - Management must make estimates of the
         uncollectability of accounts receivable. Management specifically
         analyzes accounts receivable and analyzes historical bad debts,
         customer concentrations, customer credit-worthiness, current economic
         trends and changes in customer payment terms when evaluating the
         adequacy of the allowance for doubtful accounts.

         PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
         Depreciation is provided using the straight-line method over the
         estimated useful lives of the related assets. Leasehold improvements
         are being amortized using the straight-line method over the estimated
         useful lives of the related assets or the remaining term of the lease.
         The costs of additions and improvements, which substantially extend the
         useful life of a particular asset, are capitalized. Repair and
         maintenance costs are charged to expense. When assets are sold or
         otherwise disposed of, the cost and related accumulated depreciation
         are removed from the account and the gain or loss on disposition is
         reflected in operating income.

         COMPREHENSIVE INCOME (LOSS) - Comprehensive income (loss) refers to
         revenue, expenses, gains and losses that under generally accepted
         accounting principles are included in comprehensive income but are
         excluded from net income as these amounts are recorded directly as an
         adjustment to stockholders' equity. At December 31, 2005 and 2004,
         there were no such adjustments required.

         CONCENTRATION OF CREDIT RISK - Financial instruments, which potentially
         subject the Company to concentrations of credit risk, consist
         principally of trade receivables and cash and cash equivalents.

         Concentration of credit risk with respect to trade receivables is
         generally diversified due to the large number of entities comprising
         the Company's customer base and their dispersion across geographic
         areas principally within the United States. The Company routinely
         addresses the financial strength of its customers and, as a
         consequence, believes that its receivable credit risk exposure is
         limited.

         The Company places its temporary cash investments with high credit
         quality financial institutions. At times the Company maintains bank
         account balances, which exceed FDIC limits. The Company has not
         experienced any losses in such accounts and believes that it is not
         exposed to any significant credit risk on cash. Management does not
         believe significant credit risk exists at December 31, 2005 and 2004.

         CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
         debt instruments with a maturity of three months or less, as well as
         bank money market accounts, to be cash equivalents.
--------------------------------------------------------------------------------
                                                                             F-6






                                                                 ACE MARKETING &
                                                                PROMOTIONS, INC.

NOTES TO FINANCIAL STATEMENTS
================================================================================
YEARS ENDED DECEMBER 31, 2005 AND 2004
--------------------------------------------------------------------------------

         ESTIMATES - The preparation of financial statements in conformity with
         generally accepted accounting principles requires management to make
         estimates and assumptions that affect the reported amounts of assets
         and liabilities and disclosure of contingent assets and liabilities at
         the date of the financial statements and the reported amounts of
         revenues and expenses during the reporting period. Actual results could
         differ from those estimates.

         NET INCOME PER SHARE - Basic net income per share is computed by
         dividing income available to common shareholders by the
         weighted-average number of common shares outstanding. Diluted earnings
         per share reflect, in periods in which they have a dilutive effect, the
         impact of common shares issuable upon exercise of stock options.

         ADVERTISING COSTS - Advertising costs are expensed as incurred.
         Advertising expense for the years ended December 31, 2005 and 2004
         approximated $6,100 and $600, respectively.

         STOCK-BASED COMPENSATION - The Company has adopted the disclosure
         provisions of SFAS No. 123, "Accounting for Stock-Based Compensation"
         (SFAS 123). In compliance with SFAS 123, the Company applies APB
         Opinion No. 25, "Accounting for Stock Issued to Employees", and related
         interpretations in accounting for its plans and does not recognize
         compensation expense for its employee stock-based compensation plans.
         The Company has also adopted the disclosure provisions of SFAS No. 148,
         "Accounting for Stock-Based Compensation - Transition and Disclosure".
         This pronouncement requires prominent disclosures in both annual and
         interim financial statements about the method of accounting for
         stock-based employee compensation and the effect of the method used on
         reporting results. If the Company had elected to recognize compensation
         expense based upon the fair value at the date of grant for awards under
         these plans, consistent with the methodology prescribed by SFAS 123,
         the Company's net loss and net loss per share as reported would be
         reduced for the years ended December 31, 2005 and 2004 to the pro forma
         amounts presented below:


         YEARS ENDED DECEMBER 31,                                                               2005               2004
         ----------------------------------------------------------------------------------------------------------------------
                                                                                                       
         Net Loss, as reported                                                           $         (682,538) $        (157,150)

         Add:       Stock based employee compensation expense included in reported net
                    loss                                                                                 --                 --

         Deduct:    Total stock based employee compensation expense determined under
                    fair value based method                                                        (219,135)                --
                                                                                         --------------------------------------

         Pro Forma Net Loss                                                              $         (901,673) $        (157,150)
                                                                                         ======================================

         Basic Loss Per Share:
           As reported                                                                   $             (.12) $            (.03)
                                                                                         ======================================
           Pro forma                                                                     $             (.15) $            (.03)
                                                                                         ======================================

         Diluted Loss Per Share:
           As reported                                                                   $             (.12) $            (.03)
                                                                                         ======================================
           Pro forma                                                                     $             (.15) $            (.03)
                                                                                         ======================================

--------------------------------------------------------------------------------
                                                                             F-7






                                                                 ACE MARKETING &
                                                                PROMOTIONS, INC.

NOTES TO FINANCIAL STATEMENTS
================================================================================
YEARS ENDED DECEMBER 31, 2005 AND 2004
--------------------------------------------------------------------------------

         The fair value of each option grant is estimated on the date of grant
         using the Black-Scholes option-pricing model. The following weighted
         average assumptions were used for grants during the years ended
         December 31:

                                                     2005               2004
         -----------------------------------------------------------------------

         Dividend Yield                                0.00%             n/a
         Volatility                                    7.17%             n/a
         Risk-Free Interest Rate                       2.82%             n/a
         Expected Life                            9.85 YEARS             n/a

         The Black-Scholes option valuation model was developed for use in
         estimating the fair value of traded options, which have no vesting
         restrictions and are fully transferable. In addition, option valuation
         models require the input of highly subjective assumptions including the
         expected stock price volatility. Because the Company's stock options
         have characteristics significantly different from those of traded
         options, and because changes in the subjective input assumptions can
         materially affect the fair value estimate, in management's opinion, the
         existing models do not necessarily provide a reliable single measure of
         the fair value of our stock options.

         INCOME TAXES - Deferred income taxes are recognized for temporary
         differences between financial statement and income tax basis of assets
         and liabilities for which income tax or tax benefits are expected to be
         realized in future years. A valuation allowance is established to
         reduce deferred tax assets if it is more likely than not that all, or
         some portion, of such deferred tax assets will not be realized. The
         effect on deferred taxes of a change in tax rates is recognized in
         income in the period that includes the enactment date.

         FAIR VALUE OF FINANCIAL INSTRUMENTS - In the opinion of management, the
         carrying value of all financial instruments, consisting primarily of
         cash and cash equivalents, accounts receivables and accounts payable,
         reflected in the accompanying balance sheet, approximates fair value as
         of December 31, 2005 and 2004, due to their short term nature.

         RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - In December 2004, the
         Financial Accounting Standards Board ("FASB") issued Statement of
         Financial Accounting Standard ("SFAS") No. 123(R), "Accounting for
         Stock-Based Compensation". SFAS No. 123(R) establishes standards for
         the accounting for transactions in which an entity exchanges its equity
         instruments for goods or services. This statement focuses primarily on
         accounting for transactions in which an entity obtains employee
         services in share-based payment transactions. SFAS No. 123(R) requires
         that the fair value of such equity instruments be recognized as an
         expense in the historical financial statements as services are
         performed. Prior to SFAS No. 123(R), only certain pro forma disclosures
         of fair value were required. The provisions of this statement are
         effective for the first interim reporting period that begins after
         December 15, 2005. The Company will adopt the provisions of SFAS
         No.123(R) in the first quarter of Fiscal 2006.

         In March 2005, the SEC released Staff Accounting Bulletin No. 107,
         "Share-Based Payment" ("SAB 107"), which provides interpretive guidance
         related to the interaction between SFAS 123(R) and certain SEC rules
         and regulations. It also provides the SEC staff's views regarding
         valuation of share-based payment arrangements. In April 2005, the SEC
         amended the compliance dates for SFAS 123(R), to allow companies to
         implement the standard at the beginning of their next fiscal year,
         instead of the next reporting period beginning after June 15, 2005.
         Management is currently evaluating the impact SAB 107 will have on the
         Company's consolidated financial statements.

         On December 16, 2004, the FASB issued SFAS No. 153, "Exchange of
         Non-monetary Assets", an amendment of Accounting Principles Board
         ("APB") Opinion No. 29, which differed from the International
         Accounting Standards Board's ("IASB") method of accounting for
         exchanges of similar productive assets. Statement No. 153 replaces the
         exception from fair value measurement in APB No. 29, with a general

--------------------------------------------------------------------------------
                                                                             F-8






                                                                 ACE MARKETING &
                                                                PROMOTIONS, INC.

NOTES TO FINANCIAL STATEMENTS
================================================================================
YEARS ENDED DECEMBER 31, 2005 AND 2004
--------------------------------------------------------------------------------

         exception from fair value measurement for exchanges of non-monetary
         assets that do not have commercial substance. The statement is to be
         applied prospectively and was effective for non-monetary asset
         exchanges occurring in fiscal periods beginning after June 15, 2005.
         The adoption of SFAS No. 153 did not have a material impact on the
         Company's results of operations or cash flows.

         In December 2004, the FASB issued two FASB Staff Positions - FSP FAS
         109-1, Application of FASB Statement 109 "Accounting for Income Taxes"
         to the Tax Deduction on Qualified Production Activities Provided by the
         American Jobs Creation Act of 2004, and FSP FAS 109-2 Accounting and
         Disclosure Guidance for the Foreign Earnings Repatriation Provision
         within the American Jobs Creation Act of 2004. Neither of these
         affected the Company as it does not participate in the related
         activities.

         In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting
         for Conditional Asset Retirement Obligations" ("FIN 47"). FIN 47
         provides guidance relating to the identification of and financial
         reporting for legal obligations to perform an asset retirement
         activity. The Interpretation requires recognition of a liability for
         the fair value of a conditional asset retirement obligation when
         incurred if the liability's fair value can be reasonably estimated. FIN
         47 also defines when an entity would have sufficient information to
         reasonably estimate the fair value of an asset retirement obligation.
         The provision is effective no later than the end of fiscal years ending
         after December 15, 2005. The Company will adopt FIN 47 beginning the
         first quarter of fiscal year 2006 and does not believe the adoption
         will have a material impact on its consolidated financial position or
         results of operations or cash flows.

         In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
         Error Corrections". This new standard replaces APB Opinion No. 20,
         "Accounting Changes, and FASB Statement No. 3, Reporting Accounting
         Changes in Interim Financial Statements". Among other changes, SFAS No.
         154 requires that a voluntary change in accounting principle be applied
         retrospectively with all prior period financial statements presented on
         the new accounting principle, unless it is impracticable to do so. SFAS
         No. 154 also provides that (1) a change in method of depreciating or
         amortizing a long-lived non-financial asset be accounted for as a
         change in estimate (prospectively) that was effected by a change in
         accounting principle, and (2) correction of errors in previously issued
         financial statements should be termed a "restatement". The new standard
         is effective for accounting changes and correction of errors made in
         fiscal years beginning after December 15, 2005. Early adoption of this
         standard is permitted for accounting changes and correction of errors
         made in fiscal years beginning after June 1, 2005. The Company has
         evaluated the impact of the adoption of Statement 154 and does not
         believe the impact will be significant to the Company's overall results
         of operations or financial position.

     2.  PROPERTY AND EQUIPMENT, NET

         Property and equipment, net consist of the following at December 31:

                                                 USEFUL LIVES            2005             2004
         ---------------------------------------------------------------------------------------------
                                                                           
         Furniture and Fixtures                     5 years       $          47,844 $          42,603
         Leasehold Improvements                     5 years                   8,919             3,150
                                                                  ------------------------------------
                                                                             56,763            45,753
         Less Accumulated Depreciation                                       35,663            30,073
                                                                  ------------------------------------
                                                                  $          21,100 $          15,680
                                                                  ====================================


         Depreciation expense for the years ended December 31, 2005 and 2004 was
         $5,590 and $6,020, respectively.

--------------------------------------------------------------------------------
                                                                             F-9






                                                                 ACE MARKETING &
                                                                PROMOTIONS, INC.

NOTES TO FINANCIAL STATEMENTS
================================================================================
YEARS ENDED DECEMBER 31, 2005 AND 2004
--------------------------------------------------------------------------------

     3.  NOTES PAYABLE

         Note payable to a stockholder in the original principal amount of
         $25,000, which bore interest at a rate of 10% per annum.

         Prior to the repayment of any of the principal and accrued interest,
         the holder converted the note into common stock of the Company at the
         conversion rate of $1.50 per share. On January 13, 2005, the Company
         agreed to convert the principal and accrued interest into common stock
         of the Company at a reduced conversion rate of $1.00 per share, which
         resulted in the issuance of 31,076 shares of common stock.

     4.  INCOME TAXES

         The provision for income taxes for the years ended December 31, 2005
         and 2004 is summarized as follows:

                                                     2005               2004
         --------------------------------------------------------------------------
                                                           
         Current:
           Federal                             $               -  $              -
           State                                               -                 -
                                               ------------------------------------
                                                               -                 -
                                               ------------------------------------
         Deferred:
           Federal                                             -                 -
           State                                               -                 -
                                               ------------------------------------
                                                               -                 -
                                               ------------------------------------
                                               $               -  $              -
                                               ====================================

         The Company has federal and state net operating loss carryforwards of
         approximately $494,000, which can be used to reduce future taxable
         income through 2025.

         The tax effects of temporary differences which give rise to deferred
         tax assets (liabilities) at December 31, are summarized as follows:

                                                      2005               2004
         ----------------------------------------------------------------------------

         Deferred Tax Assets:
           Net operating loss carryforwards     $         198,000 $         126,000
           Stock based compensation                       196,000                 -
           Allowance for doubtful accounts                  4,000                 -
                                                -------------------------------------
         Deferred Tax Assets                              398,000           126,000
         Less Valuation Allowance                         398,000           126,000
                                                -------------------------------------
         Net Deferred Tax Asset                 $               - $               -
                                                =====================================


--------------------------------------------------------------------------------
                                                                            F-10






                                                                 ACE MARKETING &
                                                                PROMOTIONS, INC.

NOTES TO FINANCIAL STATEMENTS
================================================================================
YEARS ENDED DECEMBER 31, 2005 AND 2004
--------------------------------------------------------------------------------


         A reconciliation of the federal statutory rate to the Company's
         effective tax rate is as follows:

         YEARS ENDED DECEMBER 31,                        2005          2004
         -----------------------------------------------------------------------

         Federal Statutory Tax Rate                    34.00%         34.00%
         State Taxes, net of federal benefit            6.00%          6.00%
         Change in Valuation Allowance                (40.00%)       (40.00%)
                                                     ---------------------------
         Total Tax Expense                              0.00%          0.00%
                                                     ===========================

     5.  STOCKHOLDERS' EQUITY

         CAPITALIZATION - On February 9, 2005, the stockholders approved an
         amendment to the Company's Certificate of Incorporation to (i) increase
         the authorized shares of Common Stock from 22,000,000 shares to
         25,000,000; par value $.0001; and (ii) create 5,000,000 shares of
         Preferred Stock, $.0001 par value. The Board of Directors has the
         authority to issue shares of Preferred Stock from time to time and to
         fix such rights, preferences and privileges of such issuances.

         PRIVATE PLACEMENT OF SECURITIES - During Fiscal 2004, the Company sold
         through a private placement, 14.74 units (each consisting of 50,000
         common shares and 50,000 Class A Warrants) at a purchase price of
         $50,000 per unit for net proceeds of $713,200, net of closing costs of
         approximately $23,800. Each Class A Warrant has an exercise price of
         $2.00 and was to expire on January 2, 2006. On February 28, 2006, the
         Company extended the expiration date of the Class A Warrants to July 1,
         2006.

         During Fiscal 2005, the Company completed a private placement through
         the sale of 10 units (each consisting of 10,000 common shares and
         10,000 Class B Warrants) at a purchase price of $10,000 per unit for
         net proceeds of $95,000, net of transaction cost of approximately
         $5,000. Each Class B Warrant has an exercise price of $2.00 and expires
         on January 2, 2008.

         WARRANTS - On June 10, 2005 the Company entered into a consulting
         agreement with a financial advisory firm. In connection with this
         agreement, the Company granted a warrant for the purchase of 1,100,000
         shares of the Company's common stock. The warrant has an exercise price
         of $.10 per share and expires on June 10, 2010. In connection with this
         grant, the Company recorded a charge of $451,000, which is included in
         general and administrative expenses. On February 27, 2006, the holder
         exercised the warrants utilizing the cashless exercise provision and
         received 1,029,032 shares of common stock in exchange for the exercise
         of the 1,100,000 warrants based on the closing price of $1.55 of the
         Company's stock on that date.

         On September 26, 2005 the Company entered into a consulting agreement
         with a financial advisory firm. In connection with this agreement, the
         Company granted a warrant for the purchase of 100,000 shares of the
         Company's common stock. The warrant has an exercise price of $2.50 per
         share and expires on August 14, 2010. In connection with this grant,
         the Company recorded a charge of $4,000, which is included in general
         and administrative expenses.

         STOCK OPTION PLAN - During Fiscal 2005, the Company established, and
         the stockholders approved, an Employee Benefit and Consulting Services
         Compensation Plan (the "Plan") for the granting of up to 2,000,000
         non-statutory and incentive stock options and stock awards to
         directors, officers, consultants and key employees of the Company. On
         June 9, 2005, the Board of Directors amended the Plan to increase the
         number of stock options and awards to be granted under the Plan to
         4,000,000.

--------------------------------------------------------------------------------
                                                                            F-11






                                                                 ACE MARKETING &
                                                                PROMOTIONS, INC.

NOTES TO FINANCIAL STATEMENTS
================================================================================
YEARS ENDED DECEMBER 31, 2005 AND 2004
--------------------------------------------------------------------------------


     

         Additional information with respect to the Plan is as follows:

         YEARS ENDED DECEMBER 31,                                2005                                 2004
         -----------------------------------------------------------------------------------------------------------------
                                                                       WEIGHTED                             Weighted
                                                                        AVERAGE                              Average
                                                                       EXERCISE                             Exercise
         Fixed Stock Options                           SHARE             PRICE             Share              Price
         -----------------------------------------------------------------------------------------------------------------

         Outstanding, beginning of year                         -  $          -                     -     $          -
         Granted                                        3,112,000             1.04                  -                -
         Forfeited                                       (335,000)            1.00                  -                -
                                                 ------------------                  -------------------
         Outstanding, end of year                       2,777,000  $          1.05                  -     $          -
                                                 ==================                  ===================

         Options exercisable, end of year                 887,800  $          1.05                  -     $          -
                                                 ==================                  ===================

         Weighted-Average Fair Values of
            Options Granted During Year                            $           .20                        $          -
                                                                   ==================                     ==================


         The following table summarizes information about stock options
         outstanding at December 31, 2005:

                                              Options Outstanding                                 Options Exercisable
                            ---------------------------------------------------------    --------------------------------------
                                                     Weighted
                                                     Average            Weighted                                 Weighted
                                                    Remaining           Average                                  Average
                                  Number           Contractual         Exercise               Number             Exercise
           Exercise Price      Outstanding            Life               Price              Outstanding           Price
         ----------------------------------------------------------------------------    --------------------------------------

                   $1.00        2,157,000             5.69 yrs.          $1.00                  665,800           $1.00
            $1.20 - 1.25          620,000             8.13 yrs.          $1.22                  222,000           $1.20


         COMMON SHARES RESERVED

         Warrants                                                     2,037,000
                                                              ==================

         Stock Option Plan                                            4,000,000
                                                              ==================

     6.  COMMITMENTS AND CONTINGENCIES

         LEASE COMMITMENTS - The Company leases office space under a
         non-cancelable operating lease, which expires in November 2007. The
         Company is currently leasing additional office space on a
         month-to-month basis. The Company leased additional office space under
         a non-cancelable operating lease, which expires on November 30, 2007.
         Minimum future rentals under non-cancelable lease commitments are as
         follows:

         YEARS ENDING DECEMBER 31,
         -----------------------------------------------------------------------

         2006                                                  $          13,000
         2007                                                             12,400


--------------------------------------------------------------------------------
                                                                            F-12






                                                                 ACE MARKETING &
                                                                PROMOTIONS, INC.

NOTES TO FINANCIAL STATEMENTS
================================================================================
YEARS ENDED DECEMBER 31, 2005 AND 2004
--------------------------------------------------------------------------------


         Rent expense was approximately $45,000 and $43,000 for the years
         December 31, 2005 and 2004, respectively.

         EMPLOYMENT CONTRACTS - On March 1, 2005, the Company entered into
         employment contracts with two of its officers. The employment
         agreements provide for minimum annual salaries plus bonuses equal to 5%
         of pre-tax earnings (as defined) and other perquisites commonly found
         in such agreements. In addition, pursuant to the employment contracts,
         the Company granted the officers options to purchase up to an aggregate
         of 400,000 shares of common stock. The employment agreements expire on
         March 1, 2008, and are renewable for a two year period. Minimum
         aggregate future commitments under the employment contracts is as
         follows:

         YEARS ENDING DECEMBER 31,
         -----------------------------------------------------------------------

         2006                                                  $         328,000
         2007                                                            376,000
         2008                                                             64,000

     7.  TRANSACTIONS WITH MAJOR CUSTOMERS

         The Company sells its products to a geographically diverse group of
         customers, performs ongoing credit evaluations of its customers and
         generally does not require collateral.

         For each of the years ended December 31, 2005 and 2004, a customer
         accounted for approximately 15% and 9% of net revenues, respectively.
         Aggregate revenues from these customers are dispersed among many
         different franchises and storefront locations.

     8.  RELATED PARTY TRANSACTIONS

         The Company purchased merchandise with a cost of approximately $10,000
         and $20,000 for the years ended December 31, 2005 and 2004,
         respectively from an entity that is owned by an individual related to
         one of the officers of the Company.

     9.  SUPPLEMENTARY INFORMATION - STATEMENT OF CASH FLOWS

         Cash paid during the years for:

         YEARS ENDED DECEMBER 31,                 2005              2004
         -----------------------------------------------------------------------

         Interest                          $           7,066  $               -
                                           =====================================

         Income Taxes                      $               -  $               -
                                           =====================================

         During the year ended December 31, 2005, the Company issued 31,076
         shares of common stock with a value of $31,076 in connection with a
         conversion of a note payable.


--------------------------------------------------------------------------------
                                                                            F-13






Item 8.  Changes in and Disagreements with Accountants on Accounting and
------------------------------------------------------------------------
Financial Disclosure.
---------------------

         Not Applicable.

Item 8.A.  Controls and Procedures.

          The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and that such information
is accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure based closely on the definition of
"disclosure controls and procedures" in Rule 13a-15(e). In designing and
evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. The Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
the Company's Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on the
foregoing, the Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures were effective
at the reasonable assurance level at the end of our most recent fiscal year
ended December 31, 2005. There have been no changes in the Company's disclosure
controls and procedures or in other factors that could affect the disclosure
controls subsequent to the date the Company completed its evaluation.

         Management has not yet completed, and is not yet required to have
completed, its assessment of the effectiveness of internal control over
financial reporting as required by Section 404 of the Sarbanes-Oxley Act.

Item 8.B.  Other Information.

         Not Applicable.

                                       24






                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
----------------------------------------------------------------------
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------

         The names, ages and principal occupations of the Company's present
officers and directors are listed below.


                                     First Became Director
     Name (1)                Age         and/or Officer                      Position
     --------                ---         --------------                      --------
                                                     
     Dean Julia              38               1998            Chief Executive Officer/ Secretary/
                                                              Treasurer/Director/Co-Founder
     Michael Trepeta         34               1998            President/Director/Co-Founder
     Scott Novack            38               1998            Director/Co-Founder
     Sean McDonnell          45               2005            Chief Financial Officer
______
(1)      Directors are elected at the annual meeting of stockholders and hold
         office until the following annual meeting.


         The terms of all officers expire at the annual meeting of directors
following the annual stockholders meeting. Officers serve at the pleasure of the
Board and may be removed, either with or without cause, by the Board of
Directors, and a successor elected by a majority vote of the Board of Directors,
at any time.

MANAGEMENT TEAM

         Our officers, directors and founders each have experience in the
development of early stage companies including business strategies, products and
services and financing.

DEAN L. JULIA

         Mr. Julia holds a Bachelor of Business Administration from Hofstra
University received in 1990. Since that time, Mr. Julia has been associated with
various broker/dealers as a stockbroker where he was involved in the funding of
numerous development stage and growth companies. From 1991 to 1996, Mr. Julia
served as a Vice President for Reich & Co. From 1993 to 1994, he was Vice
President for D. Blech & Co. From 1994 to 1995, he served as a Vice President
for GKN Securities; and from 1995 to 1996 he served as Vice President for Rickel
& Associates. From September 1996 through February 1998, Mr. Julia served as
President and Chief Executive Officer of DLJ Consulting, a financial
intermediary consultant for public and private companies. In 1998, Mr. Julia
co-founded us and became an officer, director and principal stockholder of our
company and a full time employee.

MICHAEL D. TREPETA

         Mr. Trepeta received a Bachelor of Science Degree in Applied Economics
and Business Management with a minor in Communications from Cornell University
in 1993. Since that time, Mr. Trepeta has been associated with various
broker/dealers as a stockbroker where he was involved in the funding of numerous
development stage and growth companies. Mr. Trepeta was a Vice President of


                                       25






Investments at Joseph Roberts & Co. in 1994 and a Vice President of Investments
at Rickel & Associates from 1995-1996. From September of 1996 through February
1998, he has served as President of MDT Consulting Group, Inc., a corporation
contracted by publicly traded companies to serve as a financial intermediary to
investment bankers and to assist in developing products, services, and business
strategies. In 1998, Mr. Trepeta co-founded us and he became an officer,
director and principal owner of our company and a full time employee.

SCOTT J. NOVACK

         Mr. Novack holds a Bachelor of Business Administration from Hofstra
University received in 1990. From 1993-1994, Mr. Novack was a Vice President at
D. Blech & Co., a New York investment bank specializing in raising venture
capital money for early stage companies. From 1994-1995, Mr. Novack was a Vice
President at GKN Securities, a New York based investment bank. From 1995-1996,
Mr. Novack was a Vice President at Rickel Associates, a New York based
investment bank. Mr. Novack was the President of SJN Consulting Group, Inc., a
privately held company, from 1996 to 2003. SJN was a corporation contracted by
publicly traded companies to serve as a financial intermediary to investment
bankers and to assist in developing products, services, and business strategies.
Since 2003, Mr. Novack is a private investor who invests for his own account. In
1998, Mr. Novack co-founded us and became a director of our company.

SEAN MCDONNELL

         Sean J. McDonnell, Certified Public Accountant, has been self employed
and in private accounting practice since January 1990 handling many different
types of business entities and associations. Mr. McDonnell has spent much of his
time helping his customers grow their companies and acquire financing for the
purchase of buildings and equipment. Prior to starting his own practice, he was
employed from 1985 - 1990 as a senior staff member in the accounting firm of
Breiner & Bodian CPA's. After graduating from Dowling College in 1984, he was
employed by Kenneth Silver C.P.A. from 1984 - 1985. He is currently serving on
the boards of the Police Athletic League, North East Youth Sports Association
and Sound Beach Soccer Club, Inc. Mr. McDonnell has served as our Chief
Financial Officer since January 3, 2005 and currently as an employee, he devotes
such time to our affairs as is necessary for the performance of his duties.

LACK OF COMMITTEES

         Our Company has no audit, compensation or nominating committees of our
board of directors or committees performing similar functions. We are currently
seeking to nominate and appoint to the board two independent directors and to
form an audit committee consisting of the two independent directors. It is our
goal that at least, one of the two independent directors would be deemed a
"Financial Expert" within the meaning of Sarbanes-Oxley Act of 2002, as amended.
An independent director is defined in Rule 4200(a)(14) of the NASD's Listing
Standards to mean a person other than an officer or employee of our Company or
any other individual having a relationship which, in the opinion of our board of
directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. The following persons should not be
considered independent:

         o A director who is employed by the Company or any of its affiliates
for the current year or any of the past three years;

                                       26






         o A director who accepts any compensation from the Company or any of
its affiliates in excess of $60,000 during the previous fiscal year other than
compensation for Board service, benefits under a tax qualified retirement plan,
or non discretionary compensation;
         o A director who is a member of the immediate family of an individual
who is, or has been in any of the past three years, employed by the Company or
any of its affiliates as an executive officer. Immediate family includes a
person's spouse, parents, children, siblings, mother-in-law, father-in-law,
sister-in-law, brother-in-law, son-in-law, daughter-in-law, and anyone who
resides in such person's home;
         o A director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which the Company
made, or from which the Company received, payments (other than those arising
solely from investments in the Company's securities) that exceed 5% of the
Company's or business organizations consolidated gross revenues for that year,
or $200,000, whichever is more, in any of the past three years;
         o A director who is employed as an executive of another entity where
any of the Company's executives serve on that entity's compensation committee.

         The term "Financial Expert" is defined as a person who has the
following attributes: an understanding of generally accepted accounting
principles and financial statements; has the ability to assess the general
application of such principles in connection with the accounting for estimates,
accruals and reserves; experience preparing, auditing, analyzing or evaluating
financial statements that present a breadth and level of complexity of
accounting issues that are generally comparable to the breadth and complexity of
issues that can reasonably be expected to be raised by the company's financial
statements, or experience actively supervising one or more persons engaged in
such activities; an understanding of internal controls and procedures for
financial reporting; and an understanding of audit committee functions.

         We can provide no assurances that our board's efforts to select two
persons to serve as independent directors on the Board of Directors (at least
one of which is a "Financial Expert") and on the proposed audit committee will
be successful. In the event an audit committee is established, the Board would
adopt a written charter. Such charter would be expected to include, among other
things:

         o        being directly responsible for the appointment, compensation
                  and oversight of our independent auditor, which shall report
                  directly to the audit committee, including resolution of
                  disagreements between management and the auditors regarding
                  financial reporting for the purpose of preparing or issuing an
                  audit report or related work;
         o        annually reviewing and reassessing the adequacy of the
                  committee's formal charter;
         o        reviewing the annual audited financial statements with our
                  management and the independent auditors and the adequacy of
                  our internal accounting controls;
         o        reviewing analyses prepared by our management and independent
                  auditors concerning significant financial reporting issues and
                  judgments made in connection with the preparation of our
                  financial statements;
         o        reviewing the independence of the independent auditors;
         o        reviewing our auditing and accounting principles and practices
                  with the independent auditors and reviewing major changes to
                  our auditing and accounting principles and practices as
                  suggested by the independent auditor or its management;
         o        reviewing all related party transactions on an ongoing basis
                  for potential conflict of interest situations; and
         o        all responsibilities given to the audit committee by virtue of
                  the Sarbanes-Oxley Act of 2002, which was signed into law by
                  President George W. Bush on July 30, 2002.

                                       27






CODE OF ETHICS
--------------

         Effective March 3, 2003, the Securities & Exchange Commission requires
registrants like the Company to either adopt a code of ethics that applies to
the Company's Chief Executive Officer and Chief Financial Officer or explain why
the Company has not adopted such a code of ethics. For purposes of item 406 of
Regulation S-K, the term "code of ethics" means written standards that are
reasonably designed to deter wrongdoing and to promote:

         o        Honest and ethical conduct, including the ethical handling of
                  actual or apparent conflicts of interest between personal and
                  professional relationships;
         o        Full, fair, accurate, timely and understandable disclosure in
                  reports and documents that the Company files with, or submits
                  to, the Securities & Exchange Commission and in other public
                  communications made by the Company;
         o        Compliance with applicable governmental law, rules and
                  regulations;
         o        The prompt internal reporting of violations of the code to an
                  appropriate person or persons identified in the code; and
         o        Accountability for adherence to the code.

         On March 14, 2006, the Company adopted a Code of Ethics and Code of
Conduct which have been filed as Exhibit 14.1 to our Form 10-KSB. Changes to the
Code of Ethics and Code of Conduct will be filed under a Form 8-K or quarterly
or annual report under the Exchange Act.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
-------------------------------------------------

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our officers and directors, and persons who own more than ten percent
of a registered class of our equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the
"Commission"). Officers, directors and greater than ten percent stockholders are
required by the Commission's regulations to furnish us with copies of all
Section 16(a) forms they file. During fiscal 2005, none of our officers,
directors or 10% or greater stockholders filed any forms late to the best of our
knowledge, except for certain late filings of Glenwood Capital and Peter Chung
with respect to a Form 3 and Form 4s.

Item 10.  Compensation of Directors and Executive Officers.
-----------------------------------------------------------

         The following table provides a summary compensation table with respect
to the Company's Chief Executive Officer and each officer who has salary and
bonuses of at least $100,000 for 2005. During the past three fiscal years, the
Company has not granted stock appreciation rights to its executive officers. In
addition, the Company does not have a defined benefit or actuarial plan.

                                       28







                                               SUMMARY COMPENSATION TABLE
                                               --------------------------

--------------------------------------------------------------------------- ------------------------------------ --------------
                                                                                   Long Term Compensation
--------------------------------------------------------------------------- ------------------------------------ --------------
                                 Annual Compensation                        Awards                     Payouts
----------------------- -------- ----------------------------------------- -------------------------  --------- --------------
Name and                Year     Salary ($)    Bonus ($)     Other Annual   Restricted   Number of     LTIP      All Other
Principal Position                                           Compensation   Stock        Options       Payout    Compensation
                                                             ($)(1)         Award(s)                   ($)        ($)
                                                                            ($)
----------------------- -------- ------------- ------------- -------------- ------------ ------------- --------- --------------
                                                                                               
Dean L. Julia, Chief     2005    $  141,000       $2,500         5,000          -0-          450,000      0             0
Executive Officer        2004       121,500        -0-            -0-           -0-          -0-          0             0
                         2003       108,000        -0-            -0-           -0-          -0-          0             0
----------------------- -------- ------------- ------------- -------------- ------------ ------------- --------- --------------
Michael D. Trepeta       2005      141,000        2,500           5,000         -0-          450,000      0             0
President and Chief      2004      121,500         -0-            -0-           -0-          -0-          0             0
Operating Officer        2003      108,000         -0-            -0-           -0-          -0-          0             0
----------------------- -------- ------------- ------------- -------------- ------------ ------------- --------- --------------

_______

 (1)     Includes the value of term life insurance and disability
         payments for the benefit of the officer and his family.
         Does not include the value of a leased automobile provided to the
         executive officers for business purposes as each officer has his own
         separate automobile that he uses for personal reasons.

EMPLOYMENT AGREEMENTS
---------------------

         Michael Trepeta, our president and Dean Julia, our chief executive
office, received salaries at the rate of $9,000 per month between 2002 through
March 2004, which was raised to $10,500 per month in April, 2004, $12,000 per
month in March 2005 and $14,000 per month in March 2006. Historically, all
compensation of our executive officers and directors including, without
limitation, the payment of salaries, bonuses and the grant of options and
employment contracts have been determined solely by our Board of Directors,
which is controlled by the founders of the Company. Effective March 1, 2005, we
entered into employment contracts with each of Messrs. Julia and Trepeta. These
contracts contain the following material provisions:

         o        A term of three years, with the Executive having the option to
                  renew the agreement for a period of an additional two years.
         o        A current monthly base salary of $14,000, which salary will
                  increase each subsequent March 1 by at least $2,000 per month
                  during the term of the agreements and any extension thereof.
         o        The annual grant on March 1 of each year of ten-year stock
                  options to purchase 50,000 shares at an exercise price equal
                  to the then fair market value of our common stock as
                  determined by the Board. On December 28, 2005, Messrs. Trepeta
                  and Julia each agreed to amend their employment contracts to
                  eliminate the automatic annual grant of options in
                  consideration of the grant of ten year options to purchase
                  200,000 shares exercisable at $1.20 per share, with one-half
                  immediately vested and the other half to vest on December 28,
                  2008.
         o        Annual bonuses of at least 5% of pre-tax earnings.
         o        Use of company automobile with all related costs paid for by
                  us.
         o        Health insurance.
         o        Indemnification to the extent permitted by New York law.
         o        Right to participate in any pensions of our company.

         o        Company paid disability insurance and term life insurance for
                  the benefit of his family in an amount to be fixed by the
                  Board of Directors of the Company at a cost not to exceed
                  $10,000 per annum.

Directors' Compensation
-----------------------

         Our directors are not expected to receive cash compensation for their
services as such. However, our non-employee directors will receive a fee of $500
to be paid to them for attending each meeting of the Board of Directors. All
directors will also be reimbursed for actual travel expenses incurred in
attending board meetings. Members of the board of directors are eligible to
participate under our company's stock incentive plan. Messrs. Julia and Trepeta
will receive compensation and options as executive officers pursuant to their
employment contracts and not in their capacity as directors of our company.
Equity incentive awards issued to other board members will not be a fixed amount
or granted on a pre-determined timetable. Equity incentive awards will be
determined and granted in the sole discretion of the board and/or a compensation
committee of the board at such times and in such amounts as the board or a
committee thereof determines to make such awards.

                                       29






2005 Employee Benefit and Consulting Services Compensation Plan
---------------------------------------------------------------

         On January 3, 2005, our company established an Employee Benefit and
Consulting Services Compensation Plan (the "2005 Plan") covering 2,000,000
shares, which 2005 Plan was ratified by our stockholders on February 9, 2005. On
August 12, 2005, the company's stockholders approved a 2,000,000 share increase
in the 2005 Plan to 4,000,000 shares.

ADMINISTRATION
--------------

         Our board of directors administers the 2005 Plan, has the authority to
determine and designate officers, employees, directors and consultants to whom
awards shall be made and the terms, conditions and restrictions applicable to
each award (including, but not limited to, the option price, any restriction or
limitation, any vesting schedule or acceleration thereof, and any forfeiture
restrictions). The board may, in its sole discretion, accelerate the vesting of
awards.

TYPES OF AWARDS
---------------

         The 2005 Plan is designed to enable us to offer certain officers,
employees, directors and consultants of us and our subsidiaries equity interests
in us and other incentive awards in order to attract, retain and reward such
individuals and to strengthen the mutuality of interests between such
individuals and our stockholders. In furtherance of this purpose, the 2005 Plan
contains provisions for granting non-statutory stock options and incentive stock
options and common stock awards.

         STOCK OPTIONS. A "stock option" is a contractual right to purchase a
number of shares of common stock at a price determined on the date the option is
granted. An incentive stock option is an option granted under the Internal
Revenue Code of 1986 to our employees with certain tax advantages to the grantee
over non-statutory stock options. The option price per share of common stock
purchasable upon exercise of a stock option and the time or times at which such
options shall be exercisable shall be determined by the Board at the time of
grant. Such option price in the case of incentive stock options shall not be
less than 100% of the fair market value of the common stock on the date of grant
and may be granted below fair market value in the case of non-statutory stock
options. Incentive stock options granted to owners of 10% or more of our common
stock must be granted at an exercise price of at least 110% of the fair market
value of our common stock and may not have a term greater than five years. Also,
the value of incentive options vesting to any employee cannot exceed $100,000 in
any calendar year. The option price of our options must be paid in cash, money
order, check or common stock of the company. The non-statutory stock options may
also contain at the time of grant, at the discretion of the board, certain other
cashless exercise provisions. These cashless exercise provisions are included in
the currently outstanding non-statutory stock options granted by the board.

         Options shall be exercisable at the times and subject to the conditions
determined by the Board at the date of grant, but no option may be exercisable
more than ten years after the date it is granted. If the optionee ceases to be
an employee of our company for any reason other than death, any incentive stock
option exercisable on the date of the termination of employment may be exercised
for a period of thirty days or until the expiration of the stated term of the
option, whichever period is shorter. In the event of the optionee's death, any
incentive stock option exercisable at the date of death may be exercised by the


                                       30






legal heirs of the optionee from the date of death until the expiration of the
stated term of the option or six months from the date of death, whichever event
first occurs. In the event of disability of the optionee, any incentive stock
options shall expire on the stated date that the Option would otherwise have
expired or 12 months from the date of disability, whichever event first occurs.
The termination and other provisions of a non-statutory stock option shall be
fixed by the board of directors at the date of grant of each respective option.

         COMMON STOCK AWARD. Common stock awards are shares of common stock that
will be issued to a recipient at the end of a restriction period, if any,
specified by the board if he or she continues to be an employee, director or
consultant of us. If the recipient remains an employee, director or consultant
at the end of the restriction period, the applicable restrictions will lapse and
we will issue a stock certificate representing such shares of common stock to
the participant. If the recipient ceases to be an employee, director or
consultant of us for any reason (including death, disability or retirement)
before the end of the restriction period unless otherwise determined by the
board, the restricted stock award will be terminated.

AWARDS
------

         As of March 14, 2006, we granted non-statutory stock options to
purchase 1,791,000 shares of our common stock which are currently outstanding at
exercise prices ranging from $1.00 per share to $1.25 per share, exclusive of
options to purchase 1,335,000 shares which have been cancelled since the date of
grant.. The board has granted options with varying terms.

         It is not possible to predict the individuals who will receive future
awards under the Plan or the number of shares of Common Stock covered by any
future award because such awards are wholly within the discretion of the Board.
The table below contains information as of March 14, 2006 on the known benefits
provided to certain persons and group of persons under the Plan.



   ----------------------------------------------------- ---------------- ---------------- ------------------------
                                                                                            VALUE OF UNEXERCISED
                                                            NUMBER OF        RANGE OF
                                                         SHARES SUBJECT   EXERCISE PRICE         OPTIONS AT
                                                           TO OPTIONS      ($) PER SHARE     MARCH 14, 2006 (1)
   ----------------------------------------------------- ---------------- ---------------- ------------------------
                                                                                             
   Dean L. Julia, Chief Executive Officer                    450,000      $1.00- $1.20                410,000
   ----------------------------------------------------- ---------------- ---------------- ------------------------
   Michael D. Trepeta, President                             450,000      $1.00- $1.20                410,000
   ----------------------------------------------------- ---------------- ---------------- ------------------------
   Sean McDonnell, Chief Financial officer                    50,000      $1.00- $1.20                 50,000
   ----------------------------------------------------- ---------------- ---------------- ------------------------
   Three Executive Officers As a group                       950,000      $1.00 -$1.20                870,000
   ----------------------------------------------------- ---------------- ---------------- ------------------------
   Non-Executive Officer,
   Employees and Consultants                                 841,000      $1.00- $1.25                786,000
   ----------------------------------------------------- ---------------- ---------------- ------------------------
__________

(1)     Value is normally calculated by multiplying (a) the difference between
        the market value per share at March 14, 2006 (based upon a closing sales
        price of $2.00 per share on that date) and the option exercise price by
        (b) the number of shares of Common Stock underlying the option.


ELIGIBILITY
-----------

         Our officers, employees, directors and consultants of Ace and our
subsidiaries are eligible to be granted stock options, and common stock awards.

                                       31






TERMINATION OR AMENDMENT OF THE 2005 PLAN
-----------------------------------------

         The board may at any time amend, discontinue, or terminate all or any
part of the 2005 Plan, provided, however, that unless otherwise required by law,
the rights of a participant may not be impaired without his or her consent, and
provided that we will seek the approval of our stockholders for any amendment if
such approval is necessary to comply with any applicable federal or state
securities laws or rules or regulations.


                               OPTION GRANTS TABLE
                               -------------------

         The information provided in the table below provides information with
respect to individual grants of stock options during 2005 of each of the
executive officers named in the summary compensation table above. The Company
did not grant any stock appreciation rights during 2005.


                        Option Grants in Last Fiscal Year
                        ---------------------------------
                                                                                                  Potential
                                                                                             Realizable Value at
                                                                                                Assumed Annual
                                                                                             Rates of Stock Price
                                                                                                 Appreciation
                                   Individual Grants                                         for Option Term (2)
                                   -----------------                                         -------------------

                                        (c)% of Total
                                       Options/Granted
                                         to Employees
                           Options     (Consultants) in   Exercise Price   Expiration
          Name           Granted (#)   Fiscal Year (1)        ($/Sh)          Date         5% ($)         10% ($)
          ----           -----------   ---------------        ------          ----         ------         -------
                                                                                        
 Dean L. Julia             250,000          14.0%              1.00         01/03/15      157,500         397,500
 Michael D. Trepeta        250,000          14.0%              1.00         01/03/15      157,500         397,500
 Dean L. Julia             200,000          11.2%              1.20         12/28/15      150,000         382,000
 Michael D. Trepeta        200,000          11.2%              1.20         12/28/15      150.000         382,000
_____________
N/A - Not Applicable.

(1)      The percentage of total options granted to employees in the fiscal year
         is based upon options granted to officers, directors, employees and
         consultants, exclusive of options cancelled before the filing date of
         this Form 10-KSB.

(2)      The potential realizable value of each grant of options assumes that
         the market price of the Company's Common Stock appreciates in value
         from the date of grant to the end of the option term at annualized
         rates of 5% and 10%, respectively, and after subtracting the exercise
         price from the potential realizable value.


                                       32






AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

         The information provided in the table below provides information with
respect to each exercise of stock option during 2005 by each of the executive
officers named in the summary compensation table and the fiscal year end value
of unexercised options.


           (a)                  (b)             (c)                 (d)                          (e)
                                                                                              Value of
                                                                 Number of                  Unexercised
                                                                Unexercised                 In-the-Money
                              Shares                               Options at                 Options
                            Acquired on       Value              FY-End (#)                 at Fy-End($)
                             Exercise        Realized           Exercisable/                Exercisable/
          Name             (     #   )        ($)(1)            Unexercisable             Unexercisable(1)
          ----             -----------        ------            -------------             ----------------
                                                                                
Dean L. Julia                    0              0            350,000 / 100,000              37,500/ -0-
Michael D. Trepeta               0              0            350,000 / 100,000              37,500/ -0-

(1)      The aggregate dollar values in column (c) and (e) are calculated by
         determining the difference between the fair market value of the Common
         Stock (based upon a last sale of $1.15 on December 23, 2005, which was
         the last date of sale in December 2005), underlying the options and the
         exercise price of the options at exercise or fiscal year end,
         respectively. In calculating the dollar value realized upon exercise,
         the value of any payment of the exercise price is not included.


Item 11.  Security Ownership of Certain Beneficial Owners and Management and
----------------------------------------------------------------------------
Related Stockholder Matters.
----------------------------

         As of March 14, 2006, the Company had outstanding 6,917,108 shares of
Common Stock. The only persons of record who presently hold or are known to own
(or believed by the Company to own) beneficially more than 5% of the outstanding
shares of such class of stock is listed below. The following table also sets
forth certain information as to holdings of the Company's Common Stock of all
officers and directors individually, and all officers and directors as a group.

                                       33






------------------------------------------------------------- ------------------------------- ------------------------

                                                                     NUMBER OF COMMON         APPROXIMATE
          NAME AND ADDRESS OF BENEFICIAL OWNER (1)                        SHARES              PERCENTAGE
------------------------------------------------------------- ------------------------------- ------------------------
OFFICERS AND DIRECTORS
------------------------------------------------------------- ------------------------------- ------------------------
                                                                                                 
Scott Novack
457 Rockaway Avenue
Valley Stream, NY 11583                                                    1,137,000                   16.4
------------------------------------------------------------- ------------------------------- ------------------------
------------------------------------------------------------- ------------------------------- ------------------------
Michael D. Trepeta
457 Rockaway Avenue
Valley Stream, NY 11583(2)                                                 1,452,000                   20.0
------------------------------------------------------------- ------------------------------- ------------------------
------------------------------------------------------------- ------------------------------- ------------------------
Dean L. Julia
457 Rockaway Avenue
Valley Stream, NY 11583 (2)                                                1,422,000                   19.6
------------------------------------------------------------- ------------------------------- ------------------------
------------------------------------------------------------- ------------------------------- ------------------------
Sean McDonnell
457 Rockaway Avenue
Valley Stream, NY 11583 (3)                                                   50,000                    .7
------------------------------------------------------------- ------------------------------- ------------------------
------------------------------------------------------------- ------------------------------- ------------------------
All Directors and Officers as a
Group (four persons) (4)                                                   4,061,000                   53.0
------------------------------------------------------------- ------------------------------- ------------------------
------------------------------------------------------------- ------------------------------- ------------------------
Glenwood Capital Corporation
2070 South Hibiscus Drive
North Miami Beach, FL 33181 (5)                                            1,202,912                   17.3
------------------------------------------------------------- ------------------------------- ------------------------
------------------------------------------------------------- ------------------------------- ------------------------
Domenico Iannucci
One Windsor Drive
Muttontown, NY 11753 (6)                                                     789,660                   10.7
------------------------------------------------------------- ------------------------------- ------------------------

_______________
(1)   Beneficial ownership is determined in accordance with Rule 13d-3 under the
      Securities Exchange Act of 1934, as amended, and is generally determined
      by voting powers and/or investment powers with respect to securities.
      Unless otherwise noted, all of such shares of common stock listed above
      are owned of record by each individual named as beneficial owner and such
      individual has sole voting and dispositive power with respect to the
      shares of common stock owned by each of them. Such person or entity's
      percentage of ownership is determined by assuming that any options or
      convertible securities held by such person or entity, which are
      exercisable within sixty (60) days from the date hereof, have been
      exercised or converted as the case may be, but not for the purposes of
      determining the number of outstanding shares held by any other named
      beneficial owner.

(2)   Includes options to purchase 350,000 shares.

(3)   Includes options to purchase 50,000 shares.

(4)   Includes options to purchase 750,000 shares.

(5)   Includes 1,079,032 shares and 50,000 Class B Warrants owned by Glenwood
      Capital and 73,880 shares owned by Peter S. Chung.

(6)   Includes 339,660 shares of Common Stock, Class A Warrants to purchase
      300,000 shares and Class B Warrants to purchase 50,000 shares and includes
      options to purchase 100,000 shares.

                                       34






SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.
-------------------------------------------------------------------

         The following summary information is as of March 14, 2006 and relates
to our 2005 Plan described in Item 10 pursuant to which we have granted options
to purchase our common stock:


------------------------------- ------------------------------ ---------------------- --------------------------------
                                (a)                            (b)                    (c)
------------------------------- ------------------------------ ---------------------- --------------------------------
                                                                                      Number of securities
                                                                                      remaining available for
                                Number of shares of            Weighted average       future issuance under
                                commonstock to be              exercise price of      equity compensation plans
                                issued upon exercise           outstanding            (excluding shares
Plan category                   of outstanding options         options (1)             reflected in column (a)
------------------------------- ------------------------------ ---------------------- --------------------------------
                                                                                        
Equity compensation
Plans                                     1,791,000                    1.075                     2,209,000
------------------------------- ------------------------------ ---------------------- --------------------------------
___________

(1)  Based upon 1,171,000 options exercisable at $1.00 per share, 400,000
     options exercisable at $1.20 per share and 220,000 options exercisable at
     $1.25 per share.


Item 12.  Certain Relationships and Related Transactions.
---------------------------------------------------------

         The transaction described in paragraph (i) below was approved by the
Board of directors and was an arms-length transaction which did not involve a
director or executive officer of our company. The transactions described in
paragraph (ii) below were approved by the Board of Directors based upon
obtaining at least three competitive quotes and Mr. Trepeta's wife being the
best price. The transactions described in paragraphs (i) and (ii) were on terms
to us that are at least as favorable as the terms we could have obtained from an
unaffiliated party.

         (i) On August 5, 2002, we issued to David McCooey, who is currently the
beneficial owner of 5.0% of our outstanding shares of common stock, a debenture
in the principal amount of $25,000 originally convertible at $1.50 per share.
The debenture bore interest at the rate of 10% per annum. On January 13, 2005,
we agreed with Mr. McCooey to convert his $25,000 of principal and accrued
interest thereon of $6,076, which payments were in arrears, into 31,076 shares
of our common stock at a conversion price of $1.00 per share.

          (ii) Mr. Trepeta's wife has a company which is a candle supplier. From
time-to-time, we have in the past and may in the future purchase candle supplies
from her company. During 2004 and 2005, , we purchased a total of $20,471 and
$10,313, respectively, from her company.

         In the future, we expect to have one or more members of our Board be
independent directors of our company. It is anticipated that future transactions
between us and our executive officers and directors and other affiliated parties
will be approved by the then disinterested members of the Board and, if not a
majority of the Board, then by our independent director(s) through a committee
appointed by the Board.

                                       35






Item 13. Exhibits
-----------------

Exhibit                 Description
-------                 -----------
No.
---
3.1           Articles of Incorporation filed March 26, 1998 (1)
3.2           Amendment to Articles of Incorporation filed June 10, 1999 (1)
3.3           Amendment to Articles of Incorporation approved by stockholders on
              February 9, 2005(1)
3.4           Amended By-Laws (1)
10.1          Letter Employment Agreement - Michael Trepeta (2)
10.2          Letter Employment Agreement - Dean Julia (2)
10.3          Amendment to Employment Agreement - Michael Trepeta (5)
10.4          Amendment to Employment Agreement - Dean L. Julia (5)
11.1          Statement re: Computation of per share earnings. See Statement of
              Operations and Notes to Financial Statements
14.1          Code of Ethics/Code of Conduct (5)
21.1          Subsidiaries of the Issuer - None
23.1          Accountant's Consent - Re: Form S-8 Registration Statement (5)
31.1          Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certification (3)
31.2          Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certification (3)
32.1          Chief Executive Officer Section 1350 Certification (3)
32.2          Chief Financial Officer Section 1350 Certification (3)
99.1          2005 Employee Benefit and Consulting Services Compensation Plan(2)
99.2          Form of Class A Warrant (2)
99.3          Form of Class B Warrant (2)
99.4          Amendment to 2005 Plan (4)
99.5          Release - 2005 Results of Operations (5)
____________

(1)      Incorporated by reference to Registrant's Registration Statement on
         Form 10-SB as filed with the Commission on February 10, 2005.

(2)      Incorporated by reference to Registrant's Registration Statement on
         Form 10-SB/A as filed with the Commission March 18, 2005.

(3)      Filed herewith.

(4)      Incorporated by reference to the Registrant's Form 10-QSB/A filed with
         the Commission on August 18, 2005.

(5)      Filed in March 2006 with the original filing of the Registrant's Form
         10-KSB for its fiscal year ended December 31, 2005.

Item 14.  Principal Accountant Fees and Services.
-------------------------------------------------

AUDIT FEES

         For the fiscal year ended December 31, 2005, the aggregate fees billed
for professional services rendered by Holtz Rubenstein Reminick LLP
("independent auditors") for the audit of the Company's annual financial
statements and the reviews of its financial statements included in the Company's
quarterly reports totaled approximately $43,500.

                                       36






FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

         For the fiscal year ended December 31, 2005, there were $-0- in fees
billed for professional services by the Company's independent auditors rendered
in connection with, directly or indirectly, operating or supervising the
operation of its information system or managing its local area network.

ALL OTHER FEES

         For the fiscal year ended December 31, 2005, there was $3,750 in fees
billed for preparation of corporate tax returns, tax research and other
professional services rendered by the Company's independent auditors. The
foregoing fees exclude any expense reimbursement.

                                       37






                                   SIGNATURES

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

                                       ACE MARKETING & PROMOTIONS, INC.

                                       By:  /s/ Dean L. Julia
                                            -----------------------------------
                                            Dean L. Julia, Chairman of the
                                            Board and Chief Executive Officer

Dated:  Valley Stream, New York
April 28, 2006

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

Signatures                               Title                       Date
----------                               -----                       ----

/s/ Dean L. Julia               Chairman of the Board            April  28, 2006
------------------------        Chief Executive Officer
Dean L. Julia


/s/ Sean McDonnell              Chief Financial Officer          April  28, 2006
------------------------
Sean McDonnell


/s/ Michael D. Trepeta          President, Director              April 28, 2006
------------------------
Michael D. Trepeta


/s/ Scott Novack                Director                         April 28, 2006
------------------------
Scott Novack


Dean L. Julia, Michael D. Trepeta and Scott Novack represent all the current
members of the Board of Directors.


                                       38