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 DECEMBER 31, 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 EXCHANGE ACT OF 1934)

                                YES ___     NO _X_

     AS OF FEBRUARY 21, 2006, THE COMPANY HAD 24,784,651 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

                                                                         PAGE(S)
ITEM 1.  FINANCIAL STATEMENTS


Unaudited Condensed Consolidated Balance Sheets at December 31, 2005
   and June 30, 2004.........................................................F-1

Unaudited Condensed Consolidated Statements of Operations for the three
   month and six month periods ended December 31, 2005 and for the period
   from inception (June 17, 2003) through December 31, 2005 and
   December 31, 2004.........................................................F-2

Unaudited Condensed Consolidated Statements of Cash Flows for the three
   month and six month periods ended December 31, 2005 and for the period
   from inception (June 17, 2003) through December 31, 2005 and
   December 31, 2004.........................................................F-4

Notes to Unaudited Condensed Consolidated Financial Statements...............F-6

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

                            PART II OTHER INFORMATION

Exhibits .....................................................................30
Signatures ...................................................................31

<PAGE>


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

                                                               As of
                                                        Dec 31,       June 30,
                                                         2005           2005
                                                     -----------    -----------
Current Assets:
     Cash and cash equivalents                       $     2,160    $    26,261
     Prepaid Expenses                                         --             --
                                                     -----------    -----------
          Total current assets                             2,160         26,261
                                                     -----------    -----------

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

Deferred Tax Assets                                           --             --

Other Assets                                              25,797         17,693

                                                     -----------    -----------
          Total Assets                               $   263,121    $   279,118
                                                     ===========    ===========


Current Liabilities:
  Notes payable                                      $   512,028    $   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                    5,251,075      5,123,696
                                                     -----------    -----------

Commitments and Contingencies

Stockholders' Deficit:
  Common stock; $.001 par value; 100,000,000
    authorized; 24,784,651 issued and
    outstanding Dec. 31, 2005 24,534,651
    issued and outstanding June 30, 2005                  24,785         24,535
  Preferred stock; $.001 par value;
    10,000,000 authorized;
  No shares issued or outstanding
  Additional paid-in capital                           4,321,434      4,321,684
  Accumulated deficit                                 (9,334,173)    (9,190,797)

                                                     -----------    -----------
  Total Stockholders' Deficit                         (4,987,954)    (4,844,578)
                                                     -----------    -----------

                                                     -----------    -----------
Total Liabilities and Stockholders' Deficit          $   263,121    $   279,118
                                                     ===========    ===========

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


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

<TABLE>
<CAPTION>
                                                                      Cumulative       Year-to-date    Interim Period      From
                                                                        During         July 1, 2005     Oct. 1, 2005     Inception
                                                                      Development        Through          Through         Through
                                                                         Stage        Dec. 31, 2005    Dec. 31, 2005   Dec. 31, 2004
                                                                      -----------     -------------    -------------   -------------
<S>                                                                   <C>              <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                                                             2,603,607            29,540           7,515       1,056,817
Organization costs                                                        253,683                --                         190,686
Office expense                                                            816,814            99,230           3,949         553,229
                                                                      -----------      ------------      ----------     -----------
  Total general and administrative expenses                             3,719,390           128,770          11,464       1,800,732
                                                                      -----------      ------------      ----------     -----------

OTHER INCOME (EXPENSES):
  Gain on sale of securities                                               23,198                --                              --
  Loss on abandonment of investment                                      (120,000)               --                          10,514
  Reserve for contingencies                                            (2,049,610)               --                        (120,000)
  Other Income                                                                 --                --                              --
  Interest income                                                             716                --                           1,034
  Interest expense                                                       (117,397)          (18,290)         (9,075)        (56,248)
                                                                      -----------      ------------      ----------     -----------
          Total other income (expense)                                 (2,263,093)          (18,290)         (9,075)       (164,700)
                                                                      -----------      ------------      ----------     -----------
Loss from continuing operations before income taxes                   $(5,982,482)     $   (147,059)     $  (20,538)    $(1,965,432)
  Income tax benefit (expenses)                                        (1,140,827)               --              --         625,704
                                                                      -----------      ------------      ----------     -----------
Loss from continuing operations                                       $(7,123,309)     $   (147,059)     $  (20,538)    $(1,339,728)
                                                                      -----------      ------------      ----------     -----------

DISCONTINUED OPERATIONS:
Loss from discontinued sawmill operations                             $  (170,574)     $         --                     $    51,332
Loss from asset impairment (net of taxes)                              (3,184,799)               --                              --
                                                                      -----------      ------------                     -----------
Net loss from discontinued operations before income taxes              (3,355,373)               --                          51,332
  Income tax benefit                                                    1,140,827                --                              --
                                                                      -----------      ------------                     -----------
Net loss from discontinued operations                                  (2,214,546)               --                          51,332
                                                                      -----------      ------------                     -----------
NET LOSS                                                              $(9,337,855)     $   (147,059)     $  (20,538)    $(1,288,396)
                                                                      ===========      ============      ----------     ===========

  BASIC LOSS PER COMMON SHARE:
Weighted average number of shares                                              --        24,561,700      24,588,455       9,960,263

Net loss per share from continuing operations                                               ($0.006)        ($0.001)        ($0.135)
Net loss per share from discontinued operations                                              $0.000          $0.000          $0.005
Net loss per share                                                                          ($0.006)        ($0.001)        ($0.129)


  FULLY DILUTIVE LOSS PER COMMON SHARE:
Weighted average number of shares                                              --        24,581,700      24,608,455      10,175,717

Net loss per share from continuing operations                                               ($0.006)        ($0.001)        ($0.132)
Net loss per share from discontinued operations                                              $0.000          $0.000          $0.005
Net loss per share                                                                          ($0.006)        ($0.001)        ($0.127)
</TABLE>

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


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

                            Statements of Cash Flows
                            For the Periods Indicated

<TABLE>
<CAPTION>
                                                                          Cumulative    Year-to-date   Interim Period      From
                                                                            During      July 1, 2005    Oct. 1, 2005     Inception
                                                                         Development       Through        Through         Through
                                                                            Stage       Dec. 31, 2005  Dec. 31, 2005   Dec. 31, 2004
                                                                         -----------    -------------  -------------   -------------
<S>                                                                      <C>              <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                             $(9,337,856)     $(147,059)     $  (20,538)    $(1,288,395)
    Adjustments to reconcile net loss to cash used
        in operations:
        Deferred tax benefit                                              (1,948,147)            --                        (625,703)
        Provision for valuation allowance                                  3,088,974             --                              --
        Provision for loss contingencies                                   2,049,610             --                              --
        Gain on sale of securities                                           (23,198)            --                              --
        Depreciation                                                           4,037             --                          76,739
        Loss on abandonment of investment
            deposit and license agreement                                    120,000             --                              --
        Loss from discontinued operations                                  2,214,546             --                              --
        Expenses incurred in exchange for stock                            1,164,649             --                         236,902
        (Increase) in accounts receivable and prepaid                        (85,595)
        (Increase) in inventories                                           (132,688)
        Increase in accounts payable and accrued liabilities                 520,137         73,289              --         194,273
                                                                         -----------      ---------      ----------     -----------
    NET CASH USED IN OPERATING ACTIVITIES                                $(2,147,248)     $ (73,770)     $  (20,538)    $(1,624,467)

CASH FLOWS FROM INVESTING ACTIVITIES:
    Payment of deposit on investment acquisitions                           (189,950)            --                        (177,950)
    Purchase of marketable securities                                        (50,476)            --                         (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)            --                         (10,283)
    Purchase of equipment and vehicles                                       (59,586)            --                         (87,339)
                                                                         -----------      ---------      ----------     -----------
    NET CASH USED IN INVESTING ACTIVITIES                                $  (955,954)     $      --                     $  (876,048)

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from notes payable                                              903,500         63,000           3,000         486,500
    Payments on notes payable                                                (12,289)        (5,226)             --              --
    Payments on notes payable of discontinued operations                    (470,844)            --                              --
    Payment of travel advances                                                (8,105)        (8,105)         (2,400)             --
    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                            $ 3,105,362      $  49,669      $      600     $ 2,455,505

    NET INCREASE (DECREASE) IN CASH                                      $     2,160      $ (24,101)     $  (19,938)    $   (45,010)
    Beginning Balance in Cash                                            $        --      $  26,261      $   22,098     $        --
                                                                         -----------      ---------      ----------     -----------
                                                                         $     2,160      $   2,160      $    2,160     $   (45,010)
                                                                         ===========      =========      ==========     ===========
</TABLE>

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

<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.  Its goal is to
become 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
$147,059 for the six months ending December 31, 2005 and has incurred cumulative
losses of  $9,337,855  since its  inception.  As of December 31,  2005,  current
liabilities exceed current assets by $5,248,915. 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.
<PAGE>


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.

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.
<PAGE>


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.

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

<PAGE>


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 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.

<PAGE>


NOTE 2 - PROPERTY, PLANT & EQUIPMENT

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

                                                                      12/31/2005
                                                                      ----------


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.

<PAGE>


NOTE 3 - NOTES PAYABLE

Notes payables as of December 31, 2005 consist of the following :


                                                                      12/31/2005
                                                                      ----------
Convertible Notes Payable                                              $ 20,000
Northwest Iowa Planning and Development Commission                       87,712
Brittany Capital Management Limited                                     250,000
Stockholder Loans                                                       154,316
                                                                       --------

                                                                       $512,028


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 1,600,000 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 and extended again to March 31, 2006.

On June 2, 2005, the company closed a $95,000 loan with a stockholder originally
due on August 1, 2005 and  subsequently  extended  until  February 28, 2006. 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;  and one loan  totaling  $3,000,  due October 7, 2006.
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  equivalent  value,  newly issued  restricted  common  shares of APL on the
Maturity Date of the Note.
<PAGE>


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.


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") were 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-
                                                    12/31/2005        12/31/2004
                                                     ---------         --------
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.
<PAGE>


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
                                                                    -----------
                                                                    $  3167,888
Less:  Valuation allowance                                           (3,167,888)
                                                                    -----------
      Federal                                                       $         0
                                                                    ===========


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.

<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  which was paid over a period of time with the balance
originally due in February 2005.  Approximately $960,000 was paid as of June 30,
2005.  Since the  Company  was  unable  to  secure  financing  to  complete  the
transaction  because it was in default pursuant to the Agreement.  As the remedy
for  default  contained  in the  Agreement,  the Seller took  possession  of the
premises and all assets. Although the Company was 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  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 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 exposure 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

<PAGE>


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  1,600,000  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 and
extended  again to March 31, 2006.  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 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-five  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.
<PAGE>


NOTE 8 -  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In April 2005,  Timothy  Bumgarner,  our former  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,  CEO and 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.

<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 QUARTER  ENDED  DECEMBER  31,  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

<PAGE>


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.

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 31, 2005.
<PAGE>


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. The acquisition cost has been
determined to be $1,650,000, however, we believe that we will need at least an
additional $2,000,000 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 had entered into an advisory agreement with COPS Worldwide, Inc. to
provide general consulting services of which basic financial advisory work is
one component, however, the agreement has been terminated as of November 15,
2005. 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 Capital 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

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.

     Our gross profit margins may not be comparable to those of other entities
since some

<PAGE>


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

<PAGE>


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 the United States, most of which rely on the construction industry or
the food 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.

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.
<PAGE>


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,

<PAGE>


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 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.

<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 December 31,
2005, we had total current assets of $ 2,160 and a working capital deficit of $
5,248,915. 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 and is preparing an
Agreement 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

<PAGE>


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 February 15,
2006, the last reported sale price of our common stock on the OTC Bulletin Board
was $0.07 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 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

<PAGE>


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.

<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.

<PAGE>


                           PART II - OTHER INFORMATION

ITEM 6. EXHIBITS.

     (a)  INDEX TO EXHIBITS

                  Exhibit 31.1              Section 302 Certification

                  Exhibit 32.1              Section 906 Certification

<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: February 21, 2006                By:    /s/ JAMES CRIGLER
                                               ---------------------------------
                                               James Crigler,
                                               President and CEO

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