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 March 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)


                       425 Second Street, S.E., Suite 600
                            Cedar Rapids, Iowa 52401
                    (Address of principal executive offices)

                                 (864) 936-7000
                           (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 |_|

      As of May 12, 2005, the Company had 19,825,742 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 Sheet
   at March 31, 2005.........................................................F-1
Unaudited Condensed Consolidated Statements of Operations
   for the three month and nine month periods ended
   March 31, 2005 and for the period from inception
   (June 17, 2003) through March 31, 2005....................................F-2
Unaudited Condensed Consolidated Statements of Cash Flows
   for the three month and nine month periods ended
   March 31, 2005 and for the period from inception
   (June 17, 2003) through March 31, 2005....................................F-3
Notes to Unaudited Condensed Consolidated Financial Statements...............F-4

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..............1

ITEM 3. CONTROLS AND PROCEDURES................................................4

                           PART 2 - OTHER INFORMATION

ITEM 6. EXHIBITS...............................................................5

SIGNATURES.....................................................................6


<PAGE>

                          AMERICAN PALLET LEASING, INC.
                          (A Development Stage Company)
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                      As of
<TABLE>
<CAPTION>
                                                                       March 31,
                                                                         2005
                                                                     (Unaudited)
                                                                   --------------
<S>                                                                <C>

Current Assets:
        Cash and cash equivalents                                  $       16,539
        Accounts Receivable                                                83,864
        Inventories                                                       116,641
        Marketable Securities
        Prepaid Expenses                                                   39,001
                                                                   --------------
                     Total current assets                                 256,044
                                                                   --------------

Property, Plant & Equipment (net)                                       3,386,158

Deferred Tax Assets                                                       691,862

Other Assets                                                                5,700

                                                                   --------------
                     Total Assets                                  $    4,339,765
                                                                   ==============

Current Liabilities:
        Notes payable                                              $    3,119,242
        Accounts payable and accrued liabilities                          307,576
                                                                   --------------
                     Total current liabilities                          3,426,818
                                                                   --------------

Stockholders' Equity:
        Common stock; $.001 par value; 100,000,000 authorized;
                19,250,058 issued and outstanding                          19,250
        Preferred stock; $.001 par value; 10,000,000 authorized;
        No shares issued or outstanding
        Additional paid-in capital                                      2,310,516
        Accumulated deficit                                            (1,416,819)

                                                                   --------------
        Total Stockholders' Equity                                        912,947
                                                                   --------------

                                                                   --------------
Total Liabilities and Stockholders' Equity                         $    4,339,765
                                                                   ==============
</TABLE>


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

                                      F-1
<PAGE>

                          AMERICAN PALLET LEASING, INC.
                          (A Development Stage Company)
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                       Cumulative      Year-to-date     Interim Period
                                                         During        July 1, 2004     January 1, 2005   From Inception
                                                       Development       Through           hrough            Through
                                                         Stage        March 31, 2005     March 31, 2005   March 31, 2004
                                                      ------------    --------------    --------------    --------------
<S>                                                      <C>               <C>                 <C>         <C>
SALES                                                    2,418,256         2,418,256           918,035
COST OF SALES                                            1,941,420         1,941,420           801,997

                                                      ------------    --------------    --------------
GROSS PROFIT                                               476,836           476,836           116,038
                                                      ------------    --------------    --------------

GENERAL & ADMINISTRATIVE EXPENSES:

Plant Expenses                                             523,137           523,191           213,671
Consultants                                              1,079,516           689,000            22,699           111,996
Organization costs                                         194,464            69,397             3,778            43,558
Office expense                                             707,630           654,168           154,401            42,288

                                                      ------------    --------------    --------------    --------------
       Total general and administrative expenses         2,504,746         1,935,755           394,548           197,842
                                                      ------------    --------------    --------------    --------------

OTHER INCOME (EXPENSES):
       Gain on sale of securities                           23,198            23,198            12,684                --
       Loss on abandonment of investment                  (120,000)         (120,000)
       Other Income                                         71,578            71,578            71,578                --
       Interest income                                       1,034               716                (0)               --
       Interest expense                                    (56,581)           (9,809)             (333)            1,334
                                                      ------------    --------------    --------------    --------------
             Total other income (expense)                  (80,771)           85,683            83,929          (118,666)
                                                      ------------    --------------    --------------    --------------

                                                      ------------    --------------    --------------    --------------
Loss before income tax benefit                          (2,108,681)       (1,373,236)         (194,581)         (316,508)
       Income tax benefit                                  691,862           466,129            66,158            94,577
                                                      ------------    --------------    --------------    --------------
NET LOSS                                                (1,416,819)         (907,107)         (128,423)         (221,931)
                                                      ============    ==============    ==============    ==============

BASIC LOSS PER COMMON SHARE:
       Weighted average number of shares                                                    18,493,916

       Net loss per share                                                               $       (0.007)


FULLY DILUTIVE LOSS PER COMMON SHARE:
       Weighted average number of shares                                                    18,729,600

       Net loss per share                                                               $       (0.007)

</TABLE>

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

                                      F-2

<PAGE>


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

                      Statements of Cash Flows (unaudited)
                            For the Periods Indicated
<TABLE>
<CAPTION>

                                                              Cumulative      Interim Period     Year-to-date    From Inception
                                                                During         Jan. 1, 2005      July 1, 2004    (June 17, 2003)
                                                              Development        Through            Through           Through
                                                                 Stage        Mar. 31, 2005     Mar. 31, 2005     Mar. 31, 2004
                                                             ------------    --------------    --------------    --------------
<S>                                                          <C>                   <C>               <C>               <C>
Net loss                                                     $ (1,416,819)         (128,423)         (907,107)         (221,931)
Adjustments to reconcile net loss to cash used                         --                --                --                --
     in operations:                                                    --                --                --                --
     Deferred tax benefit                                        (691,861)          (66,158)         (466,129)          (99,499)
     Depreciation                                                 182,420           105,681           182,420                --
     (Increase) in inventories                                   (116,641)           16,047          (116,641)               --
     Loss on abandonment of investment                                 --                --                --                --
         deposit and license agreement                            120,000                --                --           120,000
     Expenses incurred in exchange for stock                      308,106            71,204           227,630             3,605
     (Increase) in accounts receivable and prepaid               (122,866)          (37,271)         (122,865)           (8,523)
     Sale of Marketable Securities                                 63,160            63,160            63,160                --
     Increase in accounts payable and accrued
        liabilities                                               307,576           113,303           302,356                --
                                                             ------------    --------------    --------------    --------------
Net Cash Used in Operating Activities                        $ (1,366,925)          137,543          (837,177)         (206,348)
                                                             ------------    --------------    --------------    --------------
Payment of deposit on investment acquisitions                    (177,950)               --            (5,700)         (122,250)
Purchase of marketable securities                                 (50,476)               --           (50,476)               --
Purchase of sawmill assets                                       (550,000)               --          (500,000)               --
Payment on construction in Rock Valley                            (36,340)          (26,058)          (36,340)               --
Payment of Notes Payable                                         (122,508)         (122,508)         (122,508)               --
Purchase of equipment and vehicles                               (234,768)         (147,429)         (230,818)           (3,950)
                                                             ------------    --------------    --------------    --------------
Net Cash Used in Investing Activities                        $ (1,172,042)         (295,995)         (945,842)         (126,200)
                                                             ------------    --------------    --------------    --------------
Proceeds from notes payable                                       586,500           100,000           178,500                --
Proceeds received from shareholder advances                        35,905                --             2,054            17,940
Repayment of shareholder advances                                      --                --                --                --
Proceeds from sale of common stock                              1,933,100                --         1,593,700           316,948
                                                             ------------    --------------    --------------    --------------
Net Cash Provided by Financing Activities                    $  2,555,505           100,000         1,774,254           334,888
                                                             ------------    --------------    --------------    --------------
Net Increase (Decrease) in Cash                              $     16,539           (58,451)           (8,765)            2,340
                                                             ------------    --------------    --------------    --------------
Beginning Balance in Cash                                    $         --            74,990            25,304             2,395
                                                             ------------    --------------    --------------    --------------
                                                             $     16,539            16,539            16,539             4,735
                                                             ============    ==============    ==============    =============


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

</TABLE>

                                      F-3
<PAGE>

                          AMERICAN PALET LEASING, INC.
                          (A Development Stage Company)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 -  Basis of Presentation and Significant Accounting Policies
-------------------------------------------------------------------
BASIS OF ACCOUNTING AND CHANGE IN REPORTING ENTITY


The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. 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 is
engaged in acquisition roll-ups of strategically located wood pallet
manufacturers and saw (lumber) mills. The Company's goal is to create a "Closed
Loop Distribution System" by transforming 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.

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 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 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.

                                      F-4
<PAGE>

Inventories
Inventories are summarized as follows:       March  31,
                                                2005
                                               ----
                  Raw materials (logs)       $ 68,000
                                             --------
                  Finished cut lumber        $ 48,640
                                             --------
                                             $116,640
                                             ========

Inventories are valued at the lower of average cost or market.

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.

Recent Accounting Pronouncements

In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No.
150, "Accounting for Certain Financial Instruments with Characteristics of
Liabilities and Equity," which is effective at the beginning of the first
interim period beginning after June 15, 2003. However, certain aspects of SFAS
150 have been deferred. SFAS No. 150 establishes standards for the Company's
classification of liabilities in the financial statements that have
characteristics of both liabilities and equity. The Company will continue to
review SFAS No. 150; however, it does not expect SFAS 150 to have a material
impact on our financial position, results of operations, or cash flows.

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. The
results of operations for the three months ended March 31, 2005 are not
necessarily indicative of the results to be expected for any future period or
the full fiscal year.

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.

                                      F-5

<PAGE>

NOTE 2 - PROPERTY, PLANT & EQUIPMENT

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

                                                 03/31/2005
                                                ------------
Sawmill assets:
         Land                                   $    272,166
         Buildings                                   716,949
         Machinery & equipment                     2,402,390
                                                ------------
                  Net sawmill assets               3,391,505
         Less:  Accumulated depreciation            (154,780)
                                                ------------
                  Net sawmill assets            $  3,236,725
                                                ------------

Construction in process                         $    116,058

Corporate office assets:
         Office furniture & equipment           $     56,133
         Less:  Accumulated depreciation              (2,163)
                                                ------------
                  Net corporate office assets         53,970
                                                ------------
                                                $  3,406,753
                                                ------------

The sawmill assets were purchased on August 13, 2004 and were placed in service
by the Company on September 7, 2004. As of March 31, 2005, these assets remain
encumbered by the previous owner's lender for an outstanding loan balance in the
amount of $1,500,531. A portion of the purchase note payment will be made
directly to the previous owner's lender in exchange for a release of all liens
or encumbrances on the sawmill assets. Assets are depreciated using the
straight-line method.


NOTE 3 - NOTES PAYABLE

Convertible Notes Payable

At various dates from April 16, 2004 through June 21, 2004 various individuals
have loaned the Company funds at an 8.0% rate of interest and newly issued
shares of common stock. Each lender, at its sole discretion, has the option to
convert its note at its due date into newly issued restricted common shares of
the Company. The due dates of the notes were extended (see note 7).

                                                             Conversion
                                 Principal       Shares       Shares to be
      Original Due date           Amount         Issued         Issued
                                -----------   -----------   -----------
Due 10/01/2004                  $    65,000         5,909        29,545
Due 10/16/2004                       20,000        20,000         9,091
Due 10/20/2004                       25,000         4,545        11,364
Due 10/28/2004                      180,000        16,364        81,818
Due 11/20/2004                       25,000         2,273        11,364
Due 11/28/2004                       55,000         5,000        25,000
Due 12/05/2004                       35,000         3,182        15,909
Due 12/21/2004                       69,000         5,818        31,364
                                -----------   -----------   -----------
                                $   474,000        44,909       215,455
                                ===========   ===========   ===========

On August 13, 2004, the Company acquired its initial operating entity by
purchasing the assets of G&G/Cherokee Wood, Inc., 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, but has been extended in order to provide the Company
more time to secure adequate financing (see note 6). However, as described in
Note 6, the assets of the sawmill are encumbered. The Company has made payments
of $ 380,000 in cash and lumber to the seller; additionally, the seller has
agreed to reduce the purchase price by a portion of the extraordinary repairs
that the Company has incurred on the sawmill. The Company is finalizing
refinancing of the sawmill facility.

                                      F-6
<PAGE>

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.


NOTE 4 - INCOME TAXES

Income tax benefit consists of the following:

                                                 1/01/2005 to
                                                   3/31/2005
         Federal                                 $   128,423
                                                 ===========


The effective tax rate on income before income taxes differed from the U.S.
federal statutory rate due to minor permanent tax differences.

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.


NOTE 5 - COMMON STOCK ISSUED FOR SERVICES

Shares of common stock issued for consideration 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 6) 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.


NOTE 6 - COMMITMENTS AND CONTINGENCIES

As described in Note 3, the assets of the sawmill remain encumbered by the
previous owner's lender. A portion of the $2,750,000 payment described in Note 3
will be made directly to the previous owner's lender in exchange for a release
of all liens or encumbrances on the sawmill assets.

On September 21, 2004, the Company executed an investment banking and corporate
financial advisory agreement with COPS Worldwide, Inc., which is on a
non-exclusive basis to provide certain financial advisory services, including
COPS' introduction of the Company to NASD member broker-dealers and
institutional investors. In connection with these services the Company paid COPS
$21,300 at execution of the contract. Additionally, COPS will receive a finders'
fee in the amount of five percent (5%) of any money raised from or through
parties introduced by COPS. Finally COPS shall receive two percent (2%) of the
Company's common shares issued and outstanding as of September 22, 2004 or
224,723 common shares upon the successful completion of the Company's private
placement of cash equity (or convertible subordinated debt) amounting to a
minimum of $3,000,000 from investors introduced to the Company by COPS.

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



                  First year                         $150,000

                  Second year                        $240,000

                  Third year                         $360,000

                                      F-7
<PAGE>

NOTE 6 - COMMITMENTS AND CONTINGENCIES (Continued)


          Fourth year                        $600,000

          Fifth year and thereafter          $600,000 or more at the discretion
                                              of the Board of Directors

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). 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 then current annual salary
is provided for in the contract.

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplated the ability of the
Company to operate as a going concern. The Company has been in the development
stage since its inception on June 17, 2003. Realization of a major portion of
the assets is dependent upon the Company's ability to meet its future financing
requirements and the success of future operations. Management believes that
actions presently taken to revise the Company's operating and financial
requirements provide the opportunity for the Company to continue as a going
concern, particularly with the commencement of the sawmill operations on
September 7, 2004.

NOTE 7 - SUBSEQUENT EVENTS

Holders of $ 454,000 of the convertible notes payable (Note 3) have exercised
their conversion rights and on April 8, 2005 have received newly issued
restricted shares of the Company's common stock. Holders of the remaining
$20,000 of the convertible notes payable have entered into agreements to extend
the due dates of the notes for an additional six-month period and will come due
in October 2005.

On April 28, 2005, American Pallet Leasing, Inc. (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 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 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's 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 also entered into a note 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 president and CEO, and is due on
September 27, 2005. 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
maturity 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. 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.

                                      F-8

<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 nine months ended March 31, 2005. The
following discussion may be understood more fully by reference to the financial
statements, notes to the financial statements, and the Management's Discussion
and Analysis or Plan of Operations section contained in our Annual Report on
Form 10-KSB for 2003 filed on April 14, 2004 and 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 subject discussed below under the sub-caption "Risk Factors".

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 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 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 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.

Description Of Business

      General

Our goal is to become a vertically integrated manufacturer and logistical
supplier of pallets. We are engaged in an acquisition roll-up of strategically
located wood pallet manufacturers and saw mills. Our goal is to create 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 currently own one saw mill and intend to acquire other saw
mills as a means of sourcing cheap lumber for our wood pallet manufacturing
operations. We also hold patents on proprietary galvanized steel pallets and
intend to commence the manufacture of patented steel pallets subject to the
receipt of additional capital. We intend to enter into management and logistics
contracts with manufacturers and distributors pursuant to which we will supply
and manage all of the customers' pallet needs. We are in negotiations to procure
our initial management and logistics contracts.

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We commenced revenue producing operations in September 2004 and all revenue to
date has been derived from the sawmill operations. We intend to enter into
management and logistics contracts with manufacturers and distributors pursuant
to which we will supply and manage all of the customers' pallet needs. We are in
negotiations to procure our initial management and logistics contract, but do
not expect to commence pallet supply and management services until at least June
2005.

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.

In November 2004, we commenced construction on a wood and steel pallet
production facility in Rock Valley, Iowa. The site will be the home of our
Midwest Regional Headquarters. To facilitate this transaction, the Rock Valley
Economic Development Corporation granted us approximately 12 acres of land for
purposes of development with an estimated value of over $700,000. We have also
been approved for construction and operating capital in the aggregate amount of
$ 600,000 in the form of grants, rebates and low interest loans from state,
county, and city programs.

We have financed our activities to date through the sale of our securities.
Since our inception in June 2003, we conducted the private placement sale of our
debt and equity securities for the approximate gross proceeds of $2,455,500. In
addition to the grants indicated above from Iowa, we have obtained commitments
for U.S. Treasury tax credits in the amount of $ 20 million for future
development in South Carolina.

As of March 31, 2005, we had a working capital deficit of $3,170,774. Over the
next 12 months, in addition to the Rock Valley, Iowa facility described above,
we expect to close on a contract to purchase another saw mill and pallet
manufacturing facility and expand our plant in South Carolina. We believe that
we will need at least an additional $5,000,000 of working capital to fund our
capital requirements and, if necessary, to finance future losses from operations
as we endeavor to build revenue and reach a profitable level of operations. We
plan to obtain the additional working capital through the private placement sale
of our equity securities and state, county and local economic loans and grants.
However, as of the date of this report, we have no commitments for the sale of
our securities nor can there be any assurance that such funds will be available
on commercially reasonable terms, if at all. Should we be unable to raise the
required funds, our ability to finance our continued growth will be materially
adversely affected.

      The Industry

The pallet industry is comprised of a large number of small, fragmented pallet
manufacturers who together manufacture and sell approximately $1.6 billion of
pallets per year to our nation's manufacturers and distributors. Historically,
pallets have been wood-based and cost manufacturers and distributors
approximately $11 per pallet. Wood pallets tend to break down after just two to
three uses, and then become a disposal problem for the manufacturer and
distributor. Most disposal facilities no longer accept wood pallets and those
that do charge an average disposal fee of $2 per pallet. Several businesses
nationwide purchase at least 500,000,000 pallets per year. We believe that the
continuing need for pallets, along with the historical problems in sourcing,
storing and disposing of pallets, creates an opportunity for a vertically
integrated company that can provide an end-to-end solution for the pallet
industry. We intend to provide that solution by contracting with large pallet
users to provide complete pallet management (supply, inventory and disposal) at
less cost than what pallet manufacturers have traditionally paid for pallets in
the past.

      Pallet Management & Logistics Services

We are engaged in reducing product distribution costs for manufacturers and
distributors by providing value-added transport packaging products and
logistical services. Our transport packaging services focus on reducing customer
distribution costs and include pallet retrieval, repair, reverse distribution,
tracking, logistics and value-added information services.

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Acquiring wood pallet manufacturers and distributors combined with our pallet
management and logistics services are intended to allow us to create
credibility, reliability, consistency and performance, and perform ongoing "in
house" assessments in order to determine the optimal allocation of both wood and
steel pallets. Through these efforts, we hope to create a vertically integrated
company that offers a seamless and efficient conduit for renting steel pallets
and selling wood pallets.

We intend to develop and provide an Internet-based service to our corporate
customers that will provide a logistics and information system that manages the
flow of shipping platforms (steel pallets with embedded satellite positioning
chips) throughout the industrial supply chain within specific geographic regions
in the U.S. centered around our logistics hubs. We intend to create a closed
loop delivery, recovery and recycling system, which will enable us to
effectively rent our steel pallets to customers and provide logistics services
and information simultaneously, thereby reducing their costs, improving
inventory tracking and control, reducing waste and enhancing just in time
delivery.

Our proposed pallet management and logistics services are intended to enable the
customer to reduce overhead and we will assume total responsibility for the
ownership (steel pallets only), management and control of a customer's pallets
(wood and steel). We intend to further reduce labor and supply chain costs and
ensure seamless integration of pallets into the customer's supply chain by: (a)
on-site management of all pallets, including the inspection and sorting of
pallets; (b) inventory management and ordering of all pallets; and (c) improved
asset control and tracking, either through on-site APL personnel or a dedicated
IT connection.

      APL Steel Pallets

The need to eliminate the waste, cost, and inefficiency of wood pallets has been
obvious for some time, and several companies have attempted to introduce
alternative products in plastic, aluminum and steel. We believe that our steel
and galvanized steel pallet will offer the following advantages over other
products in the market:

o     An APL steel pallet will be able to take on a static load of up to 65,000
      pounds. Alternative materials like plastic and aluminum can hold about
      20,000 pounds per load.

o     Our steel pallets will be more environmentally friendly as they are
      reusable. Plastic and aluminum can be recycled, but because plastic or
      aluminum pallets are not as durable as steel, they must be recycled more
      often. While wood pallets can be recycled into wood particles, it is
      generally not feasible to do so. It is too dangerous to burn wood pieces
      from pallets made from hardwoods in wood stoves because they burn at
      temperatures that can warp or even melt residential wood stoves. Any
      pallets, especially those made from hardwoods, that are dumped in
      landfills can take 20 years or more to decompose.

o     Our steel pallets last long enough to deliver enough repeated uses to
      substantially lower average costs. Single or limited-use pallets are
      inherently more expensive than re-useable pallets. Reusable pallets made
      of steel can be substantially more cost effective over time than any other
      alternative.

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.

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 March 31, 2005, we had total current assets of
$256,044 and working capital deficit of $3,170,774. 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 private placement sales of our securities and borrowing from
various lending facilities. However, there are no commitments or agreements on
the part of anyone to purchase our securities. We are finalizing the refinancing
of the sawmill facility in South Carolina and have previously reported the
$100,000 six-year 4% loan from the Northwest Iowa Planning and Development
Commission.

We are a development stage company. Our present business was founded in June
2003 and we began our current revenue producing operations in September 2004. 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 companies in new and rapidly evolving.
In addition, we are subject to all of the risks, uncertainties, expenses,
delays, problem, and difficulties typically encountered in the establishment of

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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 May 11, 2005, the
last reported sale price of our common stock on the OTC Bulletin Board was $0.55
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 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.

ITEM 3. CONTROLS AND PROCEDURES

Management, including the our Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of our
disclosure controls and procedures as of the end of the period covered by this
report. Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that the disclosure controls and procedures were
effective, in all material respects, to ensure that information required to be
disclosed in the reports we file and submit under the Securities Exchange Act of
1934 are recorded, processed, summarized and reported as and when required.

There have been no significant changes in our internal controls or in other
factors which could significantly affect internal controls subsequent to the
date our management carried out their evaluation. There were no significant
deficiencies or material weaknesses identified in the evaluation and therefore,
no corrective actions were taken.

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                           PART II - OTHER INFORMATION

ITEM 6. EXHIBITS.

      (a)Index To Exhibits

            Exhibit 31.1 Section 302 Certification

            Exhibit 32.1 Section 906 Certification

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                                   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: May 16, 2005                   By: /s/ Tim Bumgarner
                                          -----------------------------
                                          Tim Bumgarner,
                                          President and Chief Executive Officer

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


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