U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                   FORM 10-QSB



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

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

         [ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(D)
               OF THE SECURITIES EXCHANGE ACT OF 1934

               FOR THE TRANSITION PERIOD FROM _______________ TO _______________

                        COMMISSION FILE NUMBER 333-99449

                          AMERICAN PALLET LEASING, INC.
        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)


             DELAWARE                                      33-0889194
   (STATE OR OTHER JURISDICTION                (IRS EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)


                       950 NORTH MILWAUKEE AVE, NUMBER 328
                            GLENVIEW, ILLINOIS 60025
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (980) 329-7350
                           (ISSUER'S TELEPHONE NUMBER)

         CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS  REQUIRED TO BE FILED BY
SECTION 13 OR 15(D) OF THE  EXCHANGE  ACT OF 1934  DURING THE PAST 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 WHETHER THE  REGISTRANT  IS A SHELL  COMPANY (AS
DEFINED IN RULE 12B-2 OF THE SECURITIES ACT OF 1934) YES     NO  X
                                                         ---    ---

         AS OF NOVEMBER 18, 2005, THE COMPANY HAD 24,534,651 SHARES OF ITS $.001
PAR VALUE COMMON STOCK ISSUED AND OUTSTANDING.

         TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES   NO  X
                                                                       ---   ---

<PAGE>

                         PART 1 - FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                                            Page(s)
                                                                                                            -------

ITEM 1.  FINANCIAL STATEMENTS

<S>                                                                                                             <C>
Unaudited Condensed Consolidated Balance Sheet at September 30, 2005............................................F-1

Unaudited  Condensed  Consolidated  Statements of Operations for the three month
   and nine month periods ended September 30, 2005 and for the period
   from inception (June 17, 2003) through September 30, 2005....................................................F-2

Unaudited  Condensed  Consolidated  Statements of Cash Flows for the three month
   and nine month periods ended September 30, 2005 and for the period
   from inception (June 17, 2003) through September 30, 2005....................................................F-4

Notes to Unaudited Condensed Consolidated Financial Statements..................................................F-6
</TABLE>

<PAGE>

                          AMERICAN PALLET LEASING, INC.
                          (A Development Stage Company)
                                 BALANCE SHEETS
                                      As of

<TABLE>
<CAPTION>
                                                                        Sept 30,            June 30,
                                                                          2005                2005
                                                                      -----------         -----------
<S>                                                                   <C>                 <C>
Current Assets:
      Cash and cash equivalents                                       $    22,098         $    26,261
      Prepaid Expenses                                                         --                  --
                                                                      -----------         -----------
                   Total current assets                                    22,098              26,261
                                                                      -----------         -----------

Property, Plant & Equipment (net)                                         235,164             235,164

Deferred Tax Assets                                                            --                  --

Other Assets                                                               23,398              17,693
                                                                      -----------         -----------
                   Total Assets                                       $   280,660         $   279,118
                                                                      ===========         ===========


Current Liabilities:
      Notes payable                                                   $   512,712         $   457,938
      Liabilities related to discounted operations                      2,240,879           2,240,879
      Accounts payable and accrued liabilities                            448,558             375,269
      Reserve for contingencies                                         2,049,610           2,049,610
                                                                      -----------         -----------
                   Total current liabilities                            5,251,759           5,123,696
                                                                      -----------         -----------

Commitments and Contingencies

Stockholders' Deficit:
      Common stock; $.001 par value; 100,000,000 authorized;
         24,534,651 issued and outstanding                                 24,535              24,535
      Preferred stock; $.001 par value; 10,000,000 authorized;
      No shares issued or outstanding
      Additional paid-in capital                                        4,321,684           4,321,684
      Accumulated deficit                                              (9,317,318)         (9,190,797)

                                                                      -----------         -----------
      Total Stockholders' Deficit                                      (4,971,099)         (4,844,578)
                                                                      -----------         -----------

                                                                      -----------         -----------
Total Liabilities and Stockholders' Deficit                           $   280,660         $   279,118
                                                                      ===========         ===========
</TABLE>


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

                                      F-1
<PAGE>

                          AMERICAN PALLET LEASING, INC.
                          (A Development Stage Company)
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                              Cumulative
                                                                During         July 1, 2005    From Inception
                                                              Development        Through          Through
                                                                 Stage        Sept. 30, 2005   Sept. 30, 2004
                                                             --------------   --------------   --------------

<S>                                                           <C>              <C>              <C>
SALES                                                                   0                0                0
COST OF SALES                                                           0                0                0
                                                              -----------      -----------      -----------
GROSS PROFIT                                                            0                0                0
                                                              -----------      -----------      -----------

GENERAL & ADMINISTRATIVE EXPENSES:

Plant Expenses                                                $    45,286      $        --      $        --
Consultants                                                     2,596,092           22,025          535,582
Organization costs                                                253,683               --           65,316
Office expense                                                    812,865           95,281          263,676
                                                              -----------      -----------      -----------
      Total general and administrative expenses                 3,707,926          117,306          864,574
                                                              -----------      -----------      -----------

OTHER INCOME (EXPENSES):
      Gain on sale of securities                                   23,198               --               --
      Loss on abandonment of investment                          (120,000)              --               --
      Reserve for contingencies                                (2,049,610)              --               --
      Other Income                                                     --               --               --
      Interest income                                                 716               --              398
      Interest expense                                           (108,322)          (9,215)          (9,476)
                                                              -----------      -----------      -----------
                Total other income (expense)                   (2,254,018)          (9,215)          (9,078)
                                                              -----------      -----------      -----------

Loss from continuing operations before income taxes           $(5,961,944)     $  (126,521)     $  (873,652)
      Income tax benefit (expenses)                            (1,140,827)              --          278,801
                                                              -----------      -----------      -----------
Loss from continuing operations                               $(7,102,771)     $  (126,521)     $  (594,851)
                                                              -----------      -----------      -----------

DISCONTINUED OPERATIONS:
Loss from discontinued sawmill operations                     $  (170,574)     $        --      $    51,381
Loss from asset impairment (net of taxes)                      (3,184,799)              --               --
                                                              -----------      -----------      -----------
Net loss from discontinued operations before income taxes      (3,355,373)              --           51,381
      Income tax benefit                                        1,140,827               --               --
                                                              -----------      -----------      -----------
Net loss from discontinued operations                          (2,214,546)              --           51,381
                                                              -----------      -----------      -----------
NET LOSS                                                      $(9,317,317)     $  (126,521)     $  (543,470)
                                                              ===========      ===========      ===========

      BASIC LOSS PER COMMON SHARE:
Weighted average number of shares                                      --       24,534,651        9,960,263

Net loss per share from continuing operations                                       ($0.01)          ($0.06)
Net loss per share from discontinued operations                                      $0.00            $0.01
Net loss per share                                                                  ($0.01)          ($0.05)


      FULLY DILUTIVE LOSS PER COMMON SHARE:
Weighted average number of shares                                      --       24,554,651       10,175,717

Net loss per share from continuing operations                                       ($0.01)          ($0.06)
Net loss per share from discontinued operations                                      $0.00            $0.01
Net loss per share                                                                  ($0.01)          ($0.05)
</TABLE>


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

                                      F-2
<PAGE>

                          AMERICAN PALLET LEASING, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                            Statements of Cash Flows
                            For the Periods Indicated

<TABLE>
<CAPTION>
                                                                  Cumulative       Year-to-date
                                                                    During         July 1, 2005    From Inception
                                                                  Development        Through          Through
                                                                     Stage        Sept. 30, 2005   Sept. 30, 2004
                                                                 --------------   --------------   --------------
<S>                                                               <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                     $(9,317,318)     $  (126,521)     $(1,053,235)
     Adjustments to reconcile net loss to cash used
         in operations:
         Deferred tax benefit                                      (1,948,147)              --         (504,533)
         Provision for valuation allowance                          3,088,974               --               --
         Provision for loss contingencies                           2,049,610               --               --
         Gain on sale of securities                                   (23,198)              --               --
         Depreciation                                                   4,037               --           16,051
         Loss on abandonment of investment
             deposit and license agreement                            120,000               --          120,000
         Loss from discontinued operations                          2,214,546               --               --
         Expenses incurred in exchange for stock                    1,164,649               --          218,280
         (Increase) in accounts receivable and prepaid                                                 (123,380)
         (Increase) in inventories                                                                      (68,337)
         Increase in accounts payable and accrued liabilities         520,137           73,289          132,559
                                                                  -----------      -----------      -----------

     NET CASH USED IN OPERATING ACTIVITIES                        $(2,126,710)     $   (53,232)     $(1,262,595)

Cash Flows From Investing Activities:
     Payment of deposit on investment acquisitions                   (189,950)              --         (177,950)
     Purchase of marketable securities                                (50,476)              --               --
     Proceeds from sale of marketable securities                       73,674               --               --
     Payment for discountinued operations                            (550,000)              --         (550,000)
     Payment on construction in Rock Valley                          (179,616)              --               --
     Purchase of equipment and vehicles                               (59,586)              --          (78,754)
                                                                  -----------      -----------      -----------

     NET CASH USED IN INVESTING ACTIVITIES                        $  (955,954)     $        --      $  (806,704)

Cash Flows From Financing Activities:
     Proceeds from notes payable                                      900,500           60,000          486,500
     Payments on notes payable                                        (12,289)          (5,226)              --
     Payments on notes payable of discontinued operations            (470,844)              --               --
     Payment of travel advances                                        (5,705)          (5,705)              --
     Proceeds received from shareholder advances                       35,905               --           35,905
     Repayments of shareholder advances                               (35,905)              --               --
     Proceeds from sale of common stock                             2,693,100               --        1,933,100
                                                                  -----------      -----------      -----------
                                                                           --               --               --
     NET CASH PROVIDED BY FINANCING ACTIVITIES                    $ 3,104,762      $    49,069      $ 2,455,505

     NET INCREASE (DECREASE) IN CASH                              $    22,098      $    (4,163)     $   386,206
                                                                           --               --               --
     Beginning Balance in Cash                                    $        --      $    26,261      $        --
                                                                  -----------      -----------      -----------
                                                                           --               --               --
                                                                  $    22,098      $    22,098      $   386,206
                                                                  ===========      ===========      ===========
</TABLE>


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

                                      F-3
<PAGE>

AMERICAN PALLET LEASING, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------------
BASIS OF ACCOUNTING AND CHANGE IN REPORTING ENTITY

The  accompanying  financial  statements  have been prepared in accordance  with
generally accepted accounting principles in the United States of America. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.

NATURE OF BUSINESS

American Pallet Leasing, Inc., a Delaware corporation  ("Company"),  has been in
the  development  stage since its inception on June 17, 2003. It is a vertically
integrated  manufacturer  and  logistical  supplier  of pallets.  The  Company's
objective is to engage in  acquisition  roll-ups of  strategically  located wood
pallet  manufacturers  and saw  (lumber)  mills  and to  create a  "Closed  Loop
Distribution  System" by  transforming  a portion of the $1.6  billion  per year
pallet business from a commodity industry into a logistics management enterprise
that will  supply  and  manage  the pallet  requirements  of  manufacturers  and
distributors.

GOING CONCERN

The  accompanying  financial  statements  had been prepared in  conformity  with
generally accepted accounting principles,  which contemplated the ability of the
Company to operate as a going concern.

As  shown  in the  financial  statements,  the  Company  incurred  a net loss of
$126,317 for the quarter ending  September 30, 2005 and has incurred  cumulative
losses of $9,317,317  since its  inception.  As of September  30, 2005,  current
liabilities exceed current assets by $5,229,661. These factors raise substantial
doubt about the Company's ability to continue as a going concern.  As management
does not anticipate  achieving sufficient cash flows from operations by June 30,
2006,  plans  include  seeking   additional  capital  through  equity  and  debt
financings.  No assurance can be given that additional capital will be available
when  required  or upon terms  acceptable  to us.  The  Company's  inability  to
generate substantial revenue or obtain additional capital through equity or debt
financings would have a material adverse effect on their financial condition and
their ability to continue operations.

The  financial  statements  do  not  include  any  adjustments  relating  to the
recoverability  and  classification  of  recorded  assets,  or the  amounts  and
classifications  of liabilities that might be necessary in the event the company
cannot continue in existence.

REORGANIZATION

We were incorporated  under the laws of the State of Delaware on April 21, 1997.
Prior  to the  reverse  acquisition  described  below,  our  corporate  name was
Literary  Playpen,  Inc.  Since  inception,  we have not  generated  significant
revenues and are considered a development  stage company as defined in Statement
of Financial Accounting  Standards No. 7. We are seeking business  opportunities
or potential business acquisitions.

                                      F-4
<PAGE>

On September 22, 2004, we executed an agreement for the  acquisition of American
Pallet Leasing,  Inc., an Iowa  corporation  ("APL-Iowa"),  pursuant to which we
acquired  all of the  outstanding  common  shares of APL-Iowa in exchange  for a
controlling block of our common shares (the "Reorganization").

Pursuant  to  a  Securities   Purchase  Agreement  and  Plan  of  Reorganization
("Purchase  Agreement"),  we issued a total of  5,758,091  shares of our  common
stock in exchange for all APL-Iowa common shares.  We issued the shares pursuant
to Rule 506  under  the  Securities  Act of  1933.  Prior  to the  closing,  Tim
Bumgarner,  the  Chairman  and Chief  Executive  Officer of  APL-Iowa  purchased
4,299,500  outstanding  restricted shares of our common stock held by certain of
our former affiliates,  including our pre-Reorganization officers, directors and
10%  shareholders.  At the same time, Mr. Bumgarner  cancelled  9,458,900 of his
common shares of APL-Iowa, so that after giving effect to the Reorganization and
Mr. Bumgarner's  private purchase,  Mr. Bumgarner's  percentage  interest in our
common  shares held by all APL-Iowa  shareholders  as a group is the same as his
percentage interest in APL-Iowa prior to the Reorganization.

The Purchase  Agreement also provided that our  pre-reorganization  officers and
directors  would resign as the sole officers and  directors  effective as of the
closing and be replaced by officers and  directors of  APL-Iowa.  In  connection
with the Reorganization, our board of directors and shareholders have approved a
change in our corporate name to "American Pallet Leasing, Inc.", effective as of
November 24, 2004.

CONCENTRATIONS OF CREDIT RISK

Financial  instruments,  which potentially subject the Company to concentrations
of credit risk,  consist  primarily of receivables and demand  deposits.  Demand
deposits  sometimes  exceed  the amount of  insurance  provided  by the  Federal
Deposit Insurance Corporation.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents represent cash on hand and in banks.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost.  Depreciation  is computed  primarily
using  the  straight-line  method  for  financial  reporting  purposes  over the
estimated useful lives of the assets.  Useful lives generally range from five to
thirty years.  Leasehold  improvements are amortized over the lesser of the term
of the lease or the estimated useful life of the assets.

Repairs and maintenance costs are expensed,  while additions and betterments are
capitalized.  The cost and related  accumulated  depreciation  of assets sold or
retired are  eliminated  from the accounts and any gains or losses are reflected
in earnings.

When long-lived asset impairment  indicators are present,  the Company evaluates
impairment of long-lived  assets by  projecting  undiscounted  cash flows of the
related  assets over the  remaining  estimated  useful lives of such assets.  If
undiscounted  cash flow  projections  are  insufficient  to recover the carrying
value of the long-lived assets under review, impairment is recorded, if any, for
the amount by which the carrying value of such assets exceeds their fair values.

INCOME TAXES

Deferred  income taxes recorded  using the liability  method reflect the net tax
effects of  temporary  differences  between the  carrying  amounts of assets and
liabilities for financial reporting purposes and the

                                      F-5
<PAGE>

amounts  used for income tax  purposes.  Valuation  allowances  are  established
against  deferred tax assets based upon whether or not the Company believes such
assets are more likely than not to be recovered.

RECENT ACCOUNTING PRONOUNCEMENTS:

SFAS No. 149 - Amendment of statement 133 on derivative  instruments and hedging
activities.  This  statement  amends  and  clarifies  financial  accounting  and
reporting for derivative  instruments embedded in other contracts  (collectively
referred to as derivatives) and for hedging activities under FASB 133 accounting
for derivative instruments and hedging activities.

SFAS No. 150- Accounting for certain financial  instruments with characteristics
of both liabilities and equity. This statement  establishes standards for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics of both liabilities and equity.

SFAS No. 151 - "Inventory  Costs,  an Amendment of ARB No. 43,  Chapter 4." SFAS
No. 151 retains  the  general  principle  of ARB No. 43,  Chapter 4,  "Inventory
Pricing," that inventories are presumed to be stated at cost; however, it amends
ARB No.  43 to  clarify  that  abnormal  amounts  of idle  facilities,  freight,
handling  costs and spoilage  should be recognized as current  period  expenses.
Also,  SFAS No. 151 requires  fixed  overhead  costs be allocated to inventories
based on normal production  capacity.  The guidance in SAFS No. 151 is effective
for inventory costs incurred during fiscal years beginning after June 15, 2005.

SFAS 123  (Revised) - "Share Based  Payment,"  which will require the Company to
measure the cost of  employee  services  received  in  exchange  for an award of
equity  instruments  based on the grant-date fair value of the award.  That cost
will be  recognized  over the period  during  which an  employee  is required to
provide  service in exchange for the  award-the  requisite  service  period.  No
compensation  cost is recognized for equity  instruments  for which employees do
not render the requisite  service.  The grant-date  fair value of employee share
options and similar  instruments will be estimated using  option-pricing  models
adjusted  for the  unique  characteristics  of those  instruments.  SFAS No. 123
(Revised)  eliminates  the use of APB Opinion No. 25. SFAS No. 123  (Revised) is
effective  for the first  interim or annual  reporting  period that begins after
December  15,  2005.  Early  adoption  for  interim or annual  periods for which
financial statements or interim reports have not been issued is encouraged.

SFAS 152 - In December 2004, the FASB issued SFAS No. 152  "Accounting  for Real
Estate  Time-Sharing  Transactions - an amendment of FASB  Statements No. 66 and
67" ("SFAS 152").  This statement  amends FASB Statement No. 66 "Accounting  for
Sales of Real  Estate" to  reference  the  financial  accounting  and  reporting
guidance  for real estate  time-sharing  transactions  that is provided in AICPA
Statement   of  Position   04-2   "Accounting   for  Real  Estate   Time-Sharing
Transactions"  ("SOP  04-2").  SFAS  152  also  amends  FASB  Statement  No.  67
"Accounting for Costs and Initial Rental  Operations of Real Estate Projects" to
state that the guidance for  incidental  operations  and costs  incurred to sell
real estate  projects does not apply to real estate  time-sharing  transactions,
with the accounting for those operations and costs being subject to the guidance
in SOP 04-2. The provisions of SFAS 152 are effective in fiscal years  beginning
after June 15, 2005.

SFAS  153 - In  December  2004,  the FASB  issued  SFAS No.  153  "Exchanges  of
Non-monetary Assets - an amendment of APB Opinion No. 29" ("SFAS 153"). SFAS 153
replaces the  exception  from fair value  measurement  in APB Opinion No. 29 for
non-monetary  exchanges of similar  productive  assets with a general  exception
from fair value  measurement  for exchanges of  non-monetary  assets that do not
have commercial  substance.  A non-monetary exchange has commercial substance if
the future cash flows of the

                                      F-6
<PAGE>

entity are expected to change  significantly  as a result of the exchange.  SFAS
153 is effective for all interim periods beginning after June 15, 2005.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

INCOME (LOSS) PER SHARE

The per share  computations are based on the weighted average shares outstanding
for each period reported for both the basic and fully dilutive loss per share.

NOTE 2 - PROPERTY, PLANT & EQUIPMENT

The  following  is a summary of  property,  plant and  equipment  at cost,  less
accumulated depreciation:

                                                    09/30/2005
                                                    ----------

Construction in process                              $179,616

Office furniture & equipment                           49,235
Vehicles                                               10,350
                                                     --------
                                                      239,201
Less:  Accumulated depreciation                        (4,037)
                                                     --------
        Total Property, Plant & Equipment            $235,164
                                                     ========

Assets are  depreciated  using the  straight-line  method  over their  estimated
useful lives of 5 to 7 years.

                                      F-7
<PAGE>

NOTE 3 - NOTES PAYABLE

Notes payables as of September 30, 2005 consist of the following :



09/30/2005
----------
Convertible Notes Payable                            $ 20,000
Northwest Iowa Planning and Development Commission     87,712
Brittany Capital Management Limited                   250,000
Stockholder Loans.                                    155,000
                                                     --------
                                                     $512,712
                                                     ========


On January 3, 2005,  the company  closed a $100,000 loan with the Northwest Iowa
Planning and Development Commission.  The six-year note bears a 4% interest rate
and is one of various incentives in the form of grants, rebates and low interest
loans  from  state,  county,  and city  programs.  Previously,  the Rock  Valley
Economic Development  Corporation granted the Company  approximately 12 acres of
land with an estimated value of over $700,000 for purposes of development of the
Wood / Steel Pallet production facility in Rock Valley,  Iowa. The company began
construction  of the facility in November 2004. The Rock Valley,  Iowa site will
be the home of the Company's Midwest Regional Headquarters.

On April 28, 2005, the company  entered into a note agreement  Brittany  Capital
Management  Limited  (see  Note 6) with  whereby  Brittany  loaned  the  Company
$250,000. The note carries a rate of interest of 8% per annum, is secured by the
pledge of 600,000  shares of our common stock owned by our former  president and
CEO, and was originally due on September 27, 2005 and  subsequently  extended to
December 31, 2005.

On June 2, 2005, the company closed a $95,000 loan with a stockholder originally
due on August 1, 2005 and subsequently extended until November 1, 2005. The note
is secured by a second mortgage on the company's property in Rock Valley,  Iowa,
200,000 shares of its common stock, and personal guarantees from two officers of
the company.

On September 6, 2005,  the company closed two loans with  stockholders  totaling
$60,000 due on September 5, 2006 at an interest rate of 8% per annum plus 24,000
shares of company stock.  These Notes are unsecured,  but have priority over all
other  liabilities of American Pallet Leasing,  Inc except for the first lien of
the secured lender.  The Lenders,  at their sole discretion,  have the option to
convert these Notes into 60,000 or  equivalent  value,  newly issued  restricted
common shares of APL on the Maturity Date of the Note.

At various  dates from April 16, 2004 through June 21, 2004 various  individuals
have loaned the Company  funds at 8.0% rate of interest and newly issued  shares
of common stock. The lender,  at his sole discretion,  has the option to convert
the note at its due date  into  newly  issued  restricted  common  shares of the
Company.  The maximum  borrowing under these convertible notes totaled $ 474,000
and all but $20,000 of the notes have been converted.

                                      F-8
<PAGE>

NOTE 4 - LIABILITIES RELATED TO DISCONTINUED OPERATIONS

On August 13,  2004,  the  Company  acquired  its  initial  operating  entity by
purchasing the assets of G&G/Cherokee  Wood,  Inc.("G&G"),  a sawmill located in
Blacksburg, South Carolina. The terms of the acquisition included a cash payment
of  $550,000  and an  unsecured  promissory  note  in  the  original  amount  of
$2,750,000,  for a total purchase  price of $3,300,000.  This note is payable in
five monthly  installments  of $30,000 and the remaining  balance was originally
due on February  23, 2005 (see note 7).  However,  as  described  in Note 7, the
assets of ("G&G") are encumbered.  On June 9, 2005, the Company  reported that a
temporary  shutdown of ("G&G") would  accelerate a planned  overhaul of the same
unit,  originally  scheduled  for later this year.  The  Company had been in the
process of raising  capital to increase  capacity  at G&G and to effect  further
acquisitions.  The Company had elected to temporarily shut down G&G's operations
in order to conserve cash and convert  production  from pine to more  profitable
hardwood.  However,  on September 1, 2005,  the Company  decided to  permanently
abandon the sawmill.  (See Note 7 - Commitments and  Contingencies)  Pursuant to
the  abandonment,  the company has  accounted for the assets,  liabilities,  and
income statement effects as discontinued operations.

NOTE 5 - INCOME TAXES

Income tax benefit consists of the following:

                                       07/01/2005-   Inception-
                                       09/30/2005    09/30/2004
                                       -----------   -----------
From Continuing Operations:
      Deferred benefit                  $ 43,017      $278,801
      Valuation allowance                (43,017)            0
                                        --------      --------
      Federal                           $     (0)     $278,801
                                        ========      ========


From Discontinued Operations:

      Deferred benefit                  $      0      $      0
                                        ========      ========

The  effective  tax rate on income  before  income taxes  differed from the U.S.
federal  statutory  rate due the change in the  valuation  allowance for all tax
attributes which management  believes it may not recognize due to there being no
operating assets in the Company at this time.

The component of deferred tax assets and liabilities are as follows:

Deferred tax assets:
      Organizational costs              $  225,733
      Net operating loss carryforward    2,942,155
                                        ----------
                                        $ 3,167,888
Less:  Valuation allowance               (3,167,888)
                                        ----------
      Federal                           $        0
                                        ==========

                                      F-9
<PAGE>

NOTE  6 - COMMON STOCK ISSUED FOR SERVICES

Shares of common  stock  issued for other than cash have been  assigned  amounts
equivalent  to the fair value of the  services or assets  received,  or the fair
value of the stock issued at the time of the exchange.

ON SEPTEMBER 22, 2004, THE COMPANY ENTERED INTO AN EMPLOYMENT AGREEMENT WITH ITS
CHIEF  FINANCIAL  OFFICER  (SEE  NOTE  7) AND A  CONSULTING  AGREEMENT  WITH  AN
INFORMATION  TECHNOLOGY  CONSULTANT.  UNDER  THE  TERMS OF THE  AGREEMENTS,  THE
COMPANY ISSUED 193,182 UNREGISTERED SHARES OF COMPANY'S COMMON STOCK. THE SHARES
WERE VALUED AT $40,568  BASED ON ESTIMATED  FAIR MARKET  VALUE OF THE  COMPANY'S
COMMON  STOCK AT THE TIME OF GRANT.  THE VALUE OF THE  SHARES  WAS  RECORDED  AS
COMPENSATION EXPENSE.

                                      F-10
<PAGE>

NOTE 7 - COMMITMENTS AND CONTINGENCIES

On June 9, 2005,  the  Company  reported a  temporary  shutdown  of its  sawmill
operations in order to conserve cash,  convert production from pine to hardwood,
and  continue  negotiating  with  institutional  investors  for a larger fund of
financing.  Management  had  arranged  for  approximately  $100,000 in operating
capital in order to resume operations within two weeks. As of June 30, 2005, the
sawmill  remained  shut down and on  September 1, 2005,  the Company  decided to
permanently abandon the sawmill.

Pursuant to a Contract of Deed (the "Agreement")  between the Company and former
owners of G&G Cherokee  (the  "Seller"),  the total  purchase  price for G&G was
approximately  $3,300,000  to be paid over a period of time with the balance due
in February  2005.  Approximately  $960,000  has been paid as of June 30,  2005.
Since the Company was unable to secure  financing to complete the transaction it
his in default pursuant to the Agreement. As the remedy for default contained in
the Agreement,  the Seller has taken  possession of the premises and all assets.
Although the Company has been working to secure  financing it was recently  sued
by the Sellers of G&G,  alleging,  among other  things,  breach of contract  and
seeking,  among other things,  damages to be  determined at trial.  Although the
Company  believes  that the basis of this  suit is  without  merit,  there is no
assurance  that it will  not  ultimately  incur  costs  related  to a  permanent
shutdown of G&G. The Company is also weighing causes of action and counterclaims
it believes it may have  against the Seller.  The Company has  reclassified  the
sawmill operations and assets as discontinued operations.

Management has determined that there is no fair market value of the assets since
there does not appear to be an  available  market nor are there any future  cash
flows. Consequently,  the loss from discontinued operations includes a loss from
the  impairment  of these  assets in the  amount of  $3,184,799  net of taxes of
$1,082,832.   Additionally,   management   has   included  in  the  reserve  for
contingencies  an  estimated  maximum  amount  of the  losses  in the  amount of
$1,549,610 due to the litigation described above.

In addition to the estimate for the litigation losses,  management has estimated
a maximum amount of exposed totaling $500,000 resulting from commitments made by
the former president and chief executive  officer for the Company in addition to
those already accrued.

On April 28, 2005, the Company  entered into a Private  Equity Credit  Agreement
with Brittany Capital Management Limited  ("Brittany").  Pursuant to the Private
Equity Credit Agreement,  the Company may, at its discretion,  periodically sell
to  Brittany  Capital  Management  Limited  shares of  common  stock for a total
purchase price of up to $5.0 million.  For each share of common stock  purchased
under the Private Equity Credit Agreement,  Brittany Capital  Management Limited
will pay the  Company 93 % of the three  lowest  closing  bid prices  during the
valuation period of the Company's common stock on the Over-the-Counter  Bulletin
Board or other  principal  market on which the Company's  common stock is traded
for the 10  trading  days  immediately  following  the notice  date.  Brittany's
obligation to purchase  shares of the  Company's  common stock under the Private
Equity Credit Agreement is subject to certain conditions,  including the Company
obtaining an effective  registration  statement  for shares of common stock sold
under the Private Equity Credit Agreement and, among other things, is limited to
purchases  that will not  result in  Brittany's  owning  more than  4.99% of the
Company's  outstanding  common stock.

Brittany Capital  Management  Limited also entered into a note agreement whereby
Brittany  will  loan the  Company  up to  $250,000.  The note  carries a rate of
interest  of 8% per annum,  is  secured  by the pledge of 600,000  shares of our
common stock owned by our former  president and CEO, and was  originally  due on
September 27, 2005 and subsequently  extended until December 31, 2005. Under the
terms of the note,  at least 50% of the sales of common  stock under the Private
Equity Credit  Agreement with Brittany must be

                                      F-11
<PAGE>

used to retire the note while the note is outstanding.  The terms of the Private
Equity Credit  Agreement also prevent us from entering into a similar  financing
arrangement  with any  third-party  for the term of the  Private  Equity  Credit
Agreement,  which is three  years.  We are also  obliged to sell to  Brittany at
least $1 million of our common stock under the Private Equity Credit  Agreement.
The note is  convertible  at the  holder's  option  for all or a portion  of the
principal  amount of the note plus accrued  interest into shares of Common Stock
at a conversion price for each share of Common Stock equal to the Current Market
Price  multiplied  by eighty  percent  (85%).  "Current  Market Price" means the
average of the three (3)  lowest  closing  bid  prices  for the Common  Stock as
reported  by  Bloomberg,  LP  or,  if  not  so  reported,  as  reported  on  the
over-the-counter market, for the ten (10) trading days ending on the trading day
immediately before the relevant  conversion date. The note accrues interest at a
rate of 8% per year.  In  addition,  the Company  granted  Brittany a warrant to
acquire  115,385  shares of Common  Stock.  The  Company  also  granted  certain
registration  rights to  Brittany in  connection  with the shares into which the
note may be  converted  as well as in  respect  of shares  that may be issued in
respect of the warrants.

On September 22, 2004 the Company executed an employment contract with the Chief
Financial  Officer  (CFO)  which was  amended  on June 29,  2005.  The  contract
includes a five-year employment term with compensation as follows:

         September 24, 2005 until September 30, 2007          $150,000
         October 1, 2007 until September 30, 2008             $165,000
         October 1, 2008 until September 30, 2009             $215,000

The contract also provides for  performance  bonus  compensation  in the form of
cash and stock to be based on very specific  performance  criteria  contained in
the contract. At the execution of this agreement, the CFO received 90,909 shares
of unregistered common stock (see note 5). The amendment to the agreement states
that the employee will be issued  500,000  additional  restricted  shares of the
Company's common stock. This contract can be terminated at the discretion of the
Board of Directors if it is considered in the best interest of the Company to do
so. If the contract is terminated by the Company,  a severance  payment equal to
one and a half times the current annual salary is provided for in the contract.

NOTE 8 -  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In April 2005,  Timothy  Bumgarner,  our President and Chief Executive  Officer,
executed a Stock Pledge  Agreement  ("Pledge  Agreement")  and Limited  Recourse
Guarantee (the  "Guarantee").  Pursuant to the Pledge  Agreement,  Mr. Bumgarner
pledged  600,000  shares of his common stock  against any and all amounts  owing
under  the   Secured   Convertible   Promissory   Note  issued  to  the  Selling
Securityholder.  In addition,  on July 19, 2005, Mr.  Bumgarner agreed to pledge
additional  shares  as  collateral,   if  necessary,   to  secure  the  loan  in
consideration for Brittany's  agreement to withdraw its request for registration
rights.

Mr.  Crigler,  a director of the Company,  is the principal owner of Cala Group,
Inc. an entity which owns 1,500,000 shares of our common stock. Mr. Crigler also
received approximately $24,500 in fees for providing certain consulting services
in connection  with the design of the steel and concrete  components of our Rock
Valley, Iowa facility.

Mr. Vinson, a director of the Company,  is a shareholder of Cala Group, Inc., an
entity which owns 1,500,000 shares of our Common Stock.

                                      F-12
<PAGE>

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

THE  FOLLOWING  IS A  DISCUSSION  OF THE RESULTS OF  OPERATIONS  AND ANALYSIS OF
FINANCIAL  CONDITION AS OF AND FOR THE QUARTERR  ENDED  SEPTEMBER 30, 2005.  THE
FOLLOWING  DISCUSSION MAY BE UNDERSTOOD MORE FULLY BY REFERENCE TO THE FINANCIAL
STATEMENTS,   NOTES  TO  THE  FINANCIAL  STATEMENTS,  THE  HISTORICAL  FINANCIAL
STATEMENTS OF OUR RECENTLY ACQUIRED SUBSIDIARY,  AMERICAN PALLET LEASING,  INC.,
AN IOWA CORPORATION ("APL-IOWA"),  CONTAINED IN THE CURRENT REPORT ON FORM 8-K/A
FILED ON OCTOBER 21, 2004.

CERTAIN STATEMENTS  CONTAINED IN THIS REPORT MAY BE DEEMED TO BE FORWARD-LOOKING
STATEMENTS AS DEFINED BY THE PRIVATE  SECURITIES  LITIGATION REFORM ACT OF 1995,
AND WE INTEND THAT SUCH FORWARD-LOOKING STATEMENTS BE SUBJECT TO THE SAFE-HARBOR
CREATED THEREBY. SUCH FORWARD-LOOKING  STATEMENTS RELATE TO, AMONG OTHER THINGS:
EXPECTED REVENUE AND EARNINGS GROWTH; ESTIMATES REGARDING THE SIZE OF OUR TARGET
MARKETS;  SUCCESSFUL  PENETRATION  OF THE PALLET  MARKETS;  EXPANSION OF PRODUCT
SALES TO PALLET CONSUMERS;  GROWTH  EXPECTATIONS FOR NEW AND EXISTING  ACCOUNTS;
EXPANSION OF PRODUCTION CAPABILITY; NEW PRODUCT INTRODUCTIONS;  AND OUR BUSINESS
MODEL. WE CAUTION THAT THESE STATEMENTS ARE QUALIFIED BY IMPORTANT  FACTORS THAT
COULD CAUSE  ACTUAL  RESULTS TO DIFFER  MATERIALLY  FROM THOSE  REFLECTED BY THE
FORWARD-LOOKING STATEMENTS HEREIN. SUCH FACTORS INCLUDE, BUT ARE NOT LIMITED TO,
THOSE SUBJECTS DISCUSSED BELOW UNDER THE SUBCAPTION "RISK FACTORS".

OVERVIEW

REORGANIZATION WITH LITERARY PLAYPEN

      We were incorporated  under the laws of the State of Delaware on April 21,
1997. Prior to the reverse  acquisition  described below, our corporate name was
Literary  Playpen,  Inc.  Since  inception,  we had  not  generated  significant
revenues and were considered a development stage company as defined in Statement
of Financial Accounting Standards No. 7. We were seeking business  opportunities
or potential business acquisitions.

      On September  22, 2004, we completed the  acquisition  of American  Pallet
Leasing, Inc., an Iowa corporation  ("APL-Iowa"),  pursuant to which we acquired
all of the  outstanding  common shares of APL-Iowa in exchange for a controlling
block of our common shares (the "Reorganization").

      Pursuant to a Securities  Purchase  Agreement  and Plan of  Reorganization
("Purchase  Agreement"),  we issued a total of  5,758,091  shares of our  common
stock in exchange for all APL-Iowa common shares.  We issued the shares pursuant
to Rule 506  under  the  Securities  Act of  1933.  Prior  to the  closing,  Tim
Bumgarner,  the  Chairman,  President  and Chief  Executive  Officer of APL-Iowa
purchased  4,299,500  outstanding  restricted shares of our common stock held by
certain of our former  affiliates,  including our  pre-Reorganization  officers,
directors  and 10%  shareholders.  At the same  time,  Mr.  Bumgarner  cancelled
9,458,900 of his common  shares of APL-Iowa,  so that after giving effect to the
Reorganization and Mr. Bumgarner's private purchase,  Mr. Bumgarner's percentage
interest in our common  shares held by all APL-Iowa  shareholders  as a group is
the same as his percentage interest in APL-Iowa prior to the Reorganization.

      The Purchase Agreement also provided that our pre-reorganization  officers
and  directors,  Michael  Morrison and Jesse  Sackman,  would resign as the sole
officers  and  directors  effective  as of the  closing  and be  replaced by Tim
Bumgarner,  Jim  Crigler  and Robert  Vinson as  directors  of our  company.  In
addition,  Mr.  Bumgarner  was  appointed to serve as our Chairman of the Board,
Chief Executive  Officer,  and President and Byron Hudson was appointed to serve
as our Chief Financial Officer.

      In  connection  with  the  Reorganization,  our  board  of  directors  and
shareholders  have approved a change in our corporate  name to "American  Pallet
Leasing, Inc.", effective as of November 24, 2004.

      In August 2004, we acquired our initial operating  business,  G&G/Cherokee
Wood,  Inc.  ("G&G/Cherokee"),  a saw mill in  Blacksburg,  South  Carolina.  We
acquired all of the common shares of G&G/Cherokee in  consideration  of $550,000
and an  unsecured  promissory  note in the  original  principal  amount of $2.75
million, for a total purchase price of $3.3 million. For the year ended December
31, 2003 G&G/Cherokee had revenues of $5,500,884 and net income of $127,726. For
the seven months ended July 31, 2004,  G&G/Cherokee  had revenues of  $3,121,586
and a net income of $197,096.  These figures are unaudited and therefore subject
to year-end audit adjustments.

                                       1
<PAGE>

PLAN OF OPERATION

We commenced  revenue  production in September 2004 with the  acquisition of the
saw mill in Blacksburg,  South Carolina.  For the first full quarter of saw mill
operations  (ended  December  31,  2004)  the saw  mill  operated  at  almost  a
break-even  level  generating  $250,200  in gross  profit and  $250,249 of plant
expenses.  For the period ending March 31, 2005, the saw mill incurred a loss of
$97,633 due to numerous  temporary plant shut-downs caused by equipment failures
and additional repair and maintenance expenses necessary to correct the problems
causing  the shut downs.  During  April and May of 2005,  the plant  experienced
additional  periods  requiring  operational  shut-downs and on June 9, 2005, the
Company  reported that a shutdown of its saw mill facility in Blacksburg,  South
Carolina,  will  accelerate  a planned  overhaul  of the same  unit,  originally
scheduled  for  later  this  year  and  convert  production  from  pine  to more
profitable hardwood.  As of the filing of this registration  statement,  we have
not resumed operations at this facility,  and after extensive  evaluation of the
potential profitability of the facility,  coupled with the operating losses that
we  have  incurred  to  date,  we have  decided  to  abandon  the  facility  and
concentrate on pallet production in other locations.

      In addition  to the  operation  losses  indicated  above,  the Company has
incurred  significant  overhead  expenses,  typical of a start-up public entity,
consisting of consulting  expenses,  organizational  costs,  and office expenses
resulting net losses amounting to $2,545,921 for the year ending June 30, 2005.

The Company is negotiating a joint-venture  contract with a pallet manufacturing
facility  in  Independence  , Iowa It is  anticipated  that  this  manufacturing
facility  can  produce up to 20,000  pallets  per month  which will be  directed
toward sales of the Company. The Company is currently  negotiating contracts for
such profitable  pallet sales.  Other similar small facilities are available for
acquisition and will allow the Company to expand in a profitable manner.

      The Company is  continuing  to negotiate on the purchase of a saw mill and
pallet manufacturing facility in Nebraska. Although the acquisition cost has not
yet been  determined,  we  believe  that we will  need at  least  an  additional
$5,000,000  of  working  capital  to  fund  the  Nebraska  acquisition  and,  if
necessary,  to finance  future  losses from  operations  as we endeavor to build
revenue and reach a profitable level of operations.

      We intend to obtain the  additional  working  capital  through the private
placement of our equity  securities  and state,  county and local economic loans
and grants.

      We have entered into an advisory  agreement with COPS  Worldwide,  Inc. to
provide general  consulting  services of which basic financial  advisory work is
one  component.  While COPS has made  introductions  to the  Company,  it has no
active role and will not have an active role in the private sales of securities.
We have paid COPS $12,500 for the  introduction to Brittany and are obligated to
issue $500,000  shares of restricted  common stock  consisting of 227,723 shares
issued in connection with the  introduction and 272,277 shares issued in lieu of
cash payments owed to COPS for additional advisory work.

      We are also in the process of locating,  and entering into a contract for,
an adequate  supply of  appropriate  species of wood, raw materials and plastics
materials to meet our manufacturing requirements.

CRITICAL ACCOUNTING POLICIES

The  preparation  of our financial  statements  requires our  management to make
estimates  and  assumptions  that affect the reported  amounts on our  financial
statements.   Management   bases  its  estimates  and  judgments  on  historical
experience and on various other factors that are believed to be reasonable under
the  circumstances.  Actual  results  may  differ  from  these  estimates  under
different assumptions or conditions.

The  Notes  to the  financial  statements  included  in this  filing  contain  a
discussion  of  our  significant   accounting  policies  and  recent  accounting
pronouncements applicable to us.

REVENUE RECOGNITION

      The Company generally recognizes revenue when products are shipped,  which
is when  title  and  risk  of  loss  pass to the  buyer,  or when  services  are
performed,  and provides for  estimated  returns and  allowances  at the time of
sale.

      The types of  expenses  included  in the cost of sales  line item  include
inbound  freight  charges,   sawmill  labor,  purchasing  and  receiving  costs,
inspection costs, warehousing costs, forest product taxes, and internal transfer
costs.  The types of expenses  included in the plant  expenses line item include
supplies,  utilities, repair and maintenance,  insurance,  vehicle expenses, and
other expenses relating to the operation of the sawmill.

                                       2
<PAGE>

      Our gross profit  margins may not be comparable to those of other entities
since some  entities  include  all of the costs  related  to their  distribution
network in cost of goods sold and we exclude a portion of them from gross profit
margin, including them instead in another line item, such as operating expenses.

CASH AND CASH EQUIVALENTS

      Cash and cash equivalents represent cash on hand and in banks.

ACCOUNTS RECEIVABLE

      The  Company  accounts  for bad  debts on  accounts  receivable  using the
reserve method.  Allowances are established  based on past bad debt  experience,
the makeup of the current portfolio and current market conditions.  At September
30, 2004 and 2003, there were no allowances recorded.

PROPERTY AND EQUIPMENT

      Property  and  equipment  are  stated at cost.  Depreciation  is  computed
primarily using the straight-line  method for financial  reporting purposes over
the estimated useful lives of the assets. Useful lives generally range from five
to thirty years.  Leasehold  improvements  are amortized  over the lesser of the
term of the lease or the estimated useful life of the assets.

      Repairs  and   maintenance   costs  are  expensed,   while  additions  and
betterments are capitalized.  The cost and related  accumulated  depreciation of
assets sold or retired are eliminated  from the accounts and any gains or losses
are reflected in earnings.

      When  long-lived  asset  impairment  indicators  are present,  the Company
evaluates impairment of long-lived assets by projecting  undiscounted cash flows
of the related assets over the remaining estimated useful lives of such assets.

If undiscounted  cash flow  projections are insufficient to recover the carrying
value of the long-lived assets under review, impairment is recorded, if any, for
the amount by which the carrying value of such assets exceeds their fair values.

INCOME TAXES

      Deferred income taxes recorded using the liability  method reflect the net
tax effects of temporary  differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Valuation allowances are established against deferred tax assets based
upon whether or not the Company believes such assets are more likely than not to
be recovered.

CONCENTRATIONS OF CREDIT RISK

      Financial   instruments,   which   potentially   subject  the  Company  to
concentrations  of credit  risk,  consist  primarily of  receivables  and demand
deposits.  Demand deposits  sometimes exceed the amount of insurance provided by
the Federal Deposit Insurance  Corporation.  The Company has not experienced any
losses in such  accounts.  The  Company  believes  they are not  exposed  to any
significant credit risk.

      The  Company  performs  ongoing  credit   evaluations  of  its  customers'
financial condition and generally requires no collateral from its customers.

      The Company  grants  credit to  customers,  substantially  all of whom are
located in east Texas or the  western  portion of  Louisiana,  which rely on the
construction industry for their ability to repay debt to Company.

FAIR VALUE OF FINANCIAL INSTRUMENTS

      Statement of Financial  Accounting  Standards No. 107,  "Disclosures about
Fair Value of Financial Instruments", requires the Company to disclose estimated
fair values for its financial  instruments.  Fair value estimates,  methods, and
assumptions are set forth below for the Company's financial instruments.

      The carrying amounts of cash, accounts  receivable,  other current assets,
accounts  payable,  accrued  liabilities,  and current  portion and  non-current
portion of notes payable approximate fair value because of the short maturity of
those instruments.

                                       3
<PAGE>

USE OF ESTIMATES

      The  preparation  of financial  statements in conformity  with  accounting
principles  generally accepted in the United States requires  management to make
estimates  and  assumptions  that affect the amounts  reported in the  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

INCOME (LOSS) PER SHARE

      The per  share  computations  are  based on the  weighted  average  shares
outstanding  for each period reported for both the basic and fully dilutive loss
per share.

REVENUE RECOGNITION POLICY

      The Company generally recognizes revenue when products are shipped,  which
is when  title  and  risk  of  loss  pass to the  buyer,  or when  services  are
performed,  and provides for  estimated  returns and  allowances  at the time of
sale.

INCOME TAXES

      The component of deferred tax assets is the result of organizational costs
that are  capitalized  and amortized  over 60 months for tax  purposes,  but are
expensed when incurred for book purposes.

RECENT ACCOUNTING PRONOUNCEMENTS:

SFAS No. 149 - Amendment of statement 133 on derivative  instruments and hedging
activities.  This  statement  amends  and  clarifies  financial  accounting  and
reporting for derivative  instruments embedded in other contracts  (collectively
referred to as derivatives) and for hedging activities under FASB 133 accounting
for derivative instruments and hedging activities.

SFAS No. 150- Accounting for certain financial  instruments with characteristics
of both liabilities and equity. This statement  establishes standards for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics of both liabilities and equity.

SFAS No. 151 - "Inventory  Costs,  an Amendment of ARB No. 43,  Chapter 4." SFAS
No. 151 retains  the  general  principle  of ARB No. 43,  Chapter 4,  "Inventory
Pricing," that inventories are presumed to be stated at cost; however, it amends
ARB No.  43 to  clarify  that  abnormal  amounts  of idle  facilities,  freight,
handling  costs and spoilage  should be recognized as current  period  expenses.
Also,  SFAS No. 151 requires  fixed  overhead  costs be allocated to inventories
based on normal production  capacity.  The guidance in SAFS No. 151 is effective
for inventory costs incurred during fiscal years beginning after June 15, 2005.

SFAS 123  (Revised) - "Share Based  Payment,"  which will require the Company to
measure the cost of  employee  services  received  in  exchange  for an award of
equity  instruments  based on the grant-date fair value of the award.  That cost
will be  recognized  over the period  during  which an  employee  is required to
provide  service in exchange for the  award-the  requisite  service  period.  No
compensation  cost is recognized for equity  instruments  for which employees do
not render the requisite  service.  The grant-date  fair value of employee share
options and similar  instruments will be estimated using  option-pricing  models
adjusted  for the  unique  characteristics  of those  instruments.  SFAS No. 123
(Revised)  eliminates  the use of APB Opinion No. 25. SFAS No. 123  (Revised) is
effective  for the first  interim or annual  reporting  period that begins after
December  15,  2005.  Early  adoption  for  interim or annual  periods for which
financial statements or interim reports have not been issued is encouraged.

SFAS 152 - In December 2004, the FASB issued SFAS No. 152  "Accounting  for Real
Estate  Time-Sharing  Transactions - an amendment of FASB  Statements No. 66 and
67" ("SFAS 152").  This statement  amends FASB Statement No. 66 "Accounting  for
Sales of Real  Estate" to  reference  the  financial  accounting  and  reporting
guidance  for real estate  time-sharing  transactions  that is provided in AICPA
Statement   of  Position   04-2   "Accounting   for  Real  Estate   Time-Sharing
Transactions"  ("SOP  04-2").  SFAS  152  also  amends  FASB  Statement  No.  67
"Accounting for Costs and Initial Rental  Operations of Real Estate Projects" to
state that the guidance for  incidental  operations  and costs  incurred to sell
real estate  projects does not apply to real estate  time-sharing  transactions,
with the accounting for those operations and costs being subject to the guidance
in SOP 04-2. The provisions of SFAS 152 are effective in fiscal years  beginning
after June 15, 20 05.

SFAS  153 - In  December  2004,  the FASB  issued  SFAS No.  153  "Exchanges  of
Non-monetary Assets - an amendment of APB Opinion No. 29" ("SFAS 153"). SFAS 153
replaces the  exception  from fair value  measurement  in APB Opinion No. 29 for
non-monetary  exchanges of similar  productive  assets with a general  exception
from fair value  measurement  for exchanges of  non-monetary  assets that do not
have commercial  substance.  A non-monetary exchange has commercial substance if
the future

                                       4
<PAGE>

cash flows of the entity are expected to change significantly as a result of the
exchange. SFAS 153 is effective for all interim periods beginning after June 15,
2005.

                                       5
<PAGE>

                                  RISK FACTORS

         You should carefully  consider the following risk factors and the other
information  in this report before  investing in our common stock.  Our business
and results of  operations  could be  seriously  harmed by any of the  following
risks.  The trading  price of our common stock could decline due to any of these
risks, and you may lose part or all of your investment.

         LIQUIDITY AND CAPITAL  RESOURCES . Our current working capital will not
be  enough  to  sustain  our  operations,  and if we  cannot  obtain  additional
financing,  we will not be able to continue to fund our expansion  plans.  As of
September  30,  2005,  we had total  current  assets  of $ 22,098  and a working
capital deficit of $ 5,229,661. Since then our working capital has decreased due
to continuing  losses from  operations.  We believe that we require a minimum of
$5,000,000  in order  to fund our  entire  planned  operations  over the next 12
months. To that end, we intend to acquire additional capital through the private
placement sale of our securities and borrowing from various lending  facilities.
Management has made plans to implement  certain  acquisitions  and joint venture
agreements  that look forward to the  complementing  of the  Company's  business
plan.  Part of these  plans  include  the  acquiring  of a  sawmill  and  pallet
manufacturing  business in North Bend, Nebraska. The company has issued a Letter
of Intent to  purchase  the  facility  and has  received  a term  sheet  from an
investment  group  indicating  the  availability  of  financing  of the project.
Additionally, the Company is negotiating with an investment group to finance the
completion of their Rock Valley, Iowa facility.  We have previously reported the
$100,000  six-year 4% loan from the  Northwest  Iowa  Planning  and  Development
Commission  and the note  agreement with Brittany  Capital  Management  Limited.
whereby  Brittany loaned the Company  $250,000.  However,  other than the above,
there  are no  commitments  or  agreements  on the  part of  anyone  to  provide
financing or purchase our securities. As a result of these financial conditions,
the report of our independent  certified public  accounting firm on our June 30,
2005  consolidated   financial  statements  includes  an  explanatory  paragraph
indicating that these  conditions raise  substantial  doubt about our ability to
continue as a going concern.

         WE ARE A DEVELOPMENT STAGE COMPANY.  We are a development stage company
and we have no significant  operating history.  As a new company,  our prospects
are subject to all risks, expenses, and uncertainties  frequently encountered by
new and rapidly evolving  companies.  In addition,  we are subject to all of the
risks,  uncertainties,  expenses,  delays,  problem, and difficulties  typically
encountered in the  establishment  of a new business and the  development of new
services and processes.  We expect that unanticipated  expenses,  problems,  and
technical  difficulties  may occur,  which may result in material delays both in
the development of our pallet manufacturing  business and in offering our closed
loop  distribution  system to the pallet market.  We expect to continue to incur
operating losses until such time as we can derive  meaningful  revenues from our
pallet manufacturing and management operations.

         OUR BUSINESS MODEL IS NEW AND HAS NOT BEEN PROVEN BY US OR ANYONE ELSE.
We are engaged in the business of developing a "closed loop distribution system"
that will transform the $1.6  billion-per-year  pallet business from a commodity
industry into a logistics management  enterprise that will supply and manage the
pallet  requirements of manufacturers  and  distributors.  We have not commenced
providing pallet management operations and, to our knowledge,  no other business
has engaged in operations  primarily  devoted  offering general pallet logistics
management.  While we believe that the  uniqueness of our business  model offers
certain potential  advantages,  that same uniqueness also offers potential risks
associated  with  the  development  of a  business  model  that is  untried  and
unproven.

         WE DO NOT HAVE AN ACTIVE  TRADING  MARKET  FOR OUR  STOCK.  Our  common
shares are traded on the OTC Bulletin  Board under the symbol "APLS." On October
13, 2005,  the last  reported sale price of our common stock on the OTC Bulletin
Board was $0.10 per share.  However,  we consider our common stock to be "thinly
traded"  and any  last  reported  sale  prices  may  not be a true  market-based
valuation of the common stock.

         WE COMPETE IN A HIGHLY  COMPETITIVE  MARKET WITH LOW BARRIERS TO ENTRY.
The markets for the types of products to be produced by us are  established  and
competitive.  Several of our  competitors or potential  competitors  have longer
operating histories,  greater name recognition,  longer client relationships and
significantly greater financial,  management,  technology,  development,  sales,
marketing and other  resources than the Company.  Should our steel  pallets,  to
which there is, at present,  no  competitor,  be received  favorably,  we expect
competition to persist,  intensify and increase in the future.  Such competition
could

                                       6
<PAGE>

materially  adversely  affect  our  business,  operating  results  or  financial
condition. Our current and potential competitors include various steel, wood and
plastic pallets of differing quality, options and pricing than APL.

         There are relatively low barriers to entry into our business.  While we
believe that none of our potential  competitors  have begun to develop,  test or
produce  products similar to those to be produced by us, we believe that similar
products could be introduced by such competitors in a relatively short period of
time.  There can be no assurance  that existing or future  competitors  will not
develop  or  offer  products  that  provide  significant  performance,  price or
technological  advantages  over those to be offered by us. Any of the  foregoing
would likely have a material adverse effect on our business, financial condition
and operating results.

         OUR MANAGEMENT TEAM HAS LIMITED SALES AND MARKETING EXPERIENCE. We have
limited experience in the areas of sales,  marketing and distribution,  and will
need to develop a sales distribution  network with sufficient  personnel.  There
can be no  assurance  that  we  will  be  able  to  develop  an  adequate  sales
distribution  network,  that establishing such a sales distribution network will
be cost-effective or that our products will realize market acceptance. There can
be no assurance that we will be successful in marketing or selling our products.

WE MAY NOT BE ABLE TO PROTECT  AND  ENFORCE OUR  INTELLECTUAL  PROPERTY  RIGHTS,
WHICH WOULD ALLOW  COMPETITORS  TO  DUPLICATE  OUR STEEL  PALLETS AND REDUCE ANY
COMPETITIVE  ADVANTAGE  WE MIGHT  HAVE AS A RESULT OF OUR  PATENTS.  We hold two
patents for our galvanized steel. There can be no assurance,  however,  that our
patents will meaningfully protect our operations from competitors

                                       7
<PAGE>

ITEM 3. CONTROLS AND PROCEDURES

As of June 30, 2005, an evaluation was performed by our Chief Executive  Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure  controls and  procedures.  Based on that  evaluation,  Our Chief
Executive  Officer and Chief  Financial  Officer  concluded  that our disclosure
controls and procedures were not effective  during the year ended June 30, 2005,
because the Company lacked certain controls in respect of the issuance of common
stock and the  contracting and payment of services in respect of consultants and
other services provided.

Subsequent to June 30, 2005, the CFO and new CEO have implemented new procedures
designed to correct these deficiencies in the organization.  Furthermore, during
the first quarter,  the CFO also instituted new controls and procedures designed
to assure that there was a proper degree of review of such transaction  prior to
their being  incorporated  into the Company's  accounting system and reported to
the Company's auditors as part of its pre-quarterly filing review.

                                       8
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

The Company and its subsidiaries are defendants from time to time in actions for
matters arising in the ordinary course of its business operations.

On August 4, 2005,  the sellers of  G&G/Cherokee,  the  Company's  former  South
Carolina subsidiary,  filed a complaint in the court of common pleas in Cherokee
County,  South  Carolina  alleging,  among other things,  breach of contract and
seeking,  among other things,  damages to be  determined at trial.  Although the
Company  believes  that the basis of this  suit is  without  merit,  there is no
assurance  that it will  not  ultimately  incur  costs  related  to a  permanent
shutdown of G&G. The Company is also weighing causes of action and counterclaims
it believes it may have against the Seller.

Because the  complaint  does not  stipulate an amount of damages  suffered,  the
Company is unable to  determine  whether this  matter,  if resolved  against the
Company,  will have a  material  adverse  effect on its  consolidated  financial
position,  results of operations  or liquidity.  The Company is not aware of any
other presently  pending or threatened or impending  matters or proceedings that
will have a material  adverse  effect on its  consolidated  financial  position,
results of operations or liquidity.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

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

There were no matters requiring a vote of security holders during this period.

Item 5. Other Information.

None.

Item 6.  Exhibits

         A. Exhibits:

31.1  Certification  of Chief Executive  Officer  Pursuant to Section 302 of the
Sarbanes-Oxley Act.

31.2  Certification  of Principal  Financial and Accounting  Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act.

32.1  Certification  of Chief  Executive  Officer and  Principal  Financial  and
Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

                                       9
<PAGE>

                                   SIGNATURES

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

                                     American Pallet Leasing, Inc.
                                     (Registrant)

Dated: November 21, 2005             By:   /s/ James Crigler
                                           -------------------------------------
                                           James Crigler,
                                           President and Chief Executive Officer

                                     By:   /s/ Byron Hudson
                                           -------------------------------------
                                           Byron Hudson,
                                           Chief Financial Officer

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