<PAGE>


                     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, 2004

         [ ]      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 February 23, 2005, the Company had 11,946,090 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 December 31, 2004..........F-1

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

Unaudited Condensed Consolidated Statements of Cash Flows for the six
   month periods ended December 31, 2004 and for the period
   from inception (June 17, 2003) through December 31, 2004..................F-3

Notes to Unaudited Condensed Consolidated Financial Statements...............F-4



<PAGE>

                          AMERICAN PALLET LEASING, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                      As of

                                                                    December 31,
                                                                        2004
                                                                     (Unaudited)
                                                                    ------------
Current Assets:
       Cash and cash equivalents                                    $    74,990
       Accounts Receivable                                               84,819
       Inventories                                                      132,688
       Marketable Securities                                             50,476
       Prepaid Expenses                                                     776
                                                                    ------------
                   Total current assets                                 343,748

Property, Plant & Equipment (net)                                     3,323,817

Deferred Tax Assets                                                     625,705

Other Assets                                                              5,700

                   Total Assets                                     $ 4,298,969
                                                                    ============


Current Liabilities:
       Notes payable                                                $ 3,141,750
       Accounts payable and accrued liabilities                         194,273
                                                                    ------------
                   Total current liabilities                          3,336,023
                                                                    ------------

Stockholders' Equity:
       Common stock; $.001 par value; 20,000,000 authorized;
               11,946,090 issued and outstanding                         22,320
       Preferred stock; $.001 par value; 10,000,000 authorized;
       No shares issued or outstanding
       Additional paid-in capital                                     2,157,498
       Accumulated deficit                                           (1,216,872)
                                                                    ------------

       Total Stockholders' Equity                                       962,946

Total Liabilities and Stockholders' Equity                          $ 4,298,969
                                                                    ============


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

                                      F-1
<PAGE>
<TABLE>

                                                     AMERICAN PALLET LEASING, INC.
                                          CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                                            (Unaudited)


                                                    Cumulative       Year-to-date        Interim Period
                                                      During         July 1, 2004       October 1, 2004      From Inception
                                                   Development          Through             Through             Through
                                                      Stage        December 31, 2004   December 31, 2004   December 31, 2003
                                                 ----------------------------------------------------------------------------
<S>                                                 <C>                 <C>                 <C>                 <C>
SALES                                               1,500,221           1,500,221           1,226,318
COST OF SALES                                       1,139,423           1,139,423             976,118
                                                 -----------------------------------------------------

GROSS PROFIT                                           360,798            360,798             250,200

GENERAL & ADMINISTRATIVE EXPENSES:

Plant Expenses                                         309,466            309,520             250,249
Consultants                                          1,056,817            666,301             130,719             107,246
Organization costs                                     190,686             65,619                 303              43,558
Office expense                                         553,229            499,767             236,091              28,832

       Total general and administrative expenses     2,110,197          1,541,206             617,361             179,637
                                                 -------------------------------------------------------------------------

OTHER INCOME (EXPENSES):
       Gain on sale of securities                       10,514             10,514              10,514
       Loss on abandonment of investment              (120,000)                                                  (120,000)
       Interest income                                   1,034                716                 318
       Interest expense                                (56,248)            (9,476)                 (0)               (992)
                                                 -------------------------------------------------------------------------
                 Total other income (expense)         (164,701)             1,753              10,831            (120,992)

                                                 -------------------------------------------------------------------------
Loss before income tax benefit                      (1,914,100)        (1,178,655)           (356,330)           (300,629)
       Income tax benefit                              625,704            399,971             121,170              94,577
                                                 -------------------------------------------------------------------------
NET LOSS                                            (1,288,396)          (778,684)           (235,160)           (206,052)
                                                 =========================================================================

BASIC LOSS PER COMMON SHARE:
       Weighted average number of shares                                                   11,437,090
       Net loss per share                        $                                     $       (0.021)

FULLY DILUTIVE LOSS PER COMMON SHARE:
       Weighted average number of shares                                                   11,672,774
       Net loss per share                        $                                     $       (0.020)

</TABLE>

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

                                                               F-2
<PAGE>
<TABLE>

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

                                                     Statements of Cash Flows
                                                     For the Periods Indicated

                                                                   Cumulative     Interim Period     Year-to-date     From Inception
                                                                     During        Oct. 1, 2004      July 1, 2004     June 17, 2003)
                                                                   Development        Through           Through          Through
                                                                     Stage         Dec. 31, 2004     Dec. 31, 2004    Dec. 31, 2003
                                                                  ------------      ------------      ------------     ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                               <C>                  <C>               <C>              <C>
     Net loss                                                     $(1,288,395)         (235,160)         (778,684)        (206,052)
     Adjustments to reconcile net loss to cash used
        in operations:
        Deferred tax benefit                                         (625,703)         (121,170)         (399,971)         (94,577)
        Depreciation                                                   76,739            60,688            76,739               --
        (Increase) in inventories                                    (132,688)          (64,351)         (132,688)
        Loss on abandonment of investment                                  --
            deposit and license agreement                             120,000                                              120,000
        Expenses incurred in exchange for stock                       236,902            18,802           156,426            3,605
        (Increase) in accounts receivable and prepaid                 (85,595)           37,785           (85,595)          (1,471)
                                                                  ------------      ------------      ------------
        Increase in accounts payable and accrued liabilities          194,273            61,714           189,053
                                                                  ------------      ------------      ------------     ------------
     NET CASH USED IN OPERATING ACTIVITIES                         (1,504,468)         (241,693)         (974,720)        (178,495)
                                                                  ------------      ------------      ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Payment of deposit on investment acquisitions                   (177,950)                             (5,700)        (120,000)
     Purchase of marketable securities                                (50,476)          (50,476)          (50,476)
     Purchase of sawmill assets                                      (550,000)                           (500,000)
     Payment on construction in Rock Valley                           (10,283)          (10,283)          (10,283)
     Purchase of equipment and vehicles                               (87,339)           (8,585)          (83,389)          (3,950)
                                                                  ------------      ------------      ------------     ------------

     NET CASH USED IN INVESTING ACTIVITIES                           (876,047)          (69,343)         (649,847)        (123,950)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from notes payable                                      486,500                              78,500
     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          294,600
                                                                  ------------      ------------      ------------     ------------
     NET CASH PROVIDED BY FINANCING ACTIVITIES                      2,455,505                --         1,674,254          312,540

NET INCREASE (DECREASE) IN CASH                                        74,990          (311,036)           49,686           10,096

Beginning Balance in Cash                                                               386,026            25,304            2,395

                                                                  $    74,990            74,990            74,990           12,491
                                                                  ============      ============      ============     ============
</TABLE>

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

                                                               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 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 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.

                                      F-4
<PAGE>

         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.

INVENTORIES
Inventories are summarized as follows:                         December 31,
                                                                   2004
                                                                   ----
                  Raw materials (logs)                          $  88,000
                  Finished cut lumber                           $  44,688
                                                                ----------
                                                                $ 132,688
                                                                ==========

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.

                                      F-5
<PAGE>

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 December 31, 2004 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.

NOTE 2 - PROPERTY, PLANT & EQUIPMENT

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

                                                                     12/31/2004
                                                                     ----------
Sawmill assets:

         Land                                                       $   272,166
         Buildings                                                      688,716
         Machinery & equipment                                        2,380,245
                                                                    ------------
                Net sawmill assets                                    3,341,127
         Less:  Accumulated depreciation                                (76,415)
                                                                    ------------
                  Net sawmill assets                                $ 3,264,712
                                                                    ------------

Construction in process                                             $    10,283

Corporate office assets:

         Office furniture & equipment                               $    50,239
         Less:  Accumulated depreciation                                 (1,418)
                                                                    ------------
                  Net corporate office assets                            48,821
                                                                    ------------
                                                                    $ 3,389,817
                                                                    ============

                                      F-6
<PAGE>

The sawmill assets were purchased on August 13, 2004 and were placed in service
by the Company on September 7, 2004. These assets remain encumbered by the
previous owner's lender for an outstanding loan balance in the amount of
$1,500,531 as of December 31, 2004. 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 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. See note 8.

                                                                     Conversion
                                 Principal           Shares           Shares to
                                  Amount             Issued           Be issued
                                  ------             ------           ---------
Due 10/01/2004                   $ 65,000             5,909            29,545
Due 10/16/2004                     20,000             1,818             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 due on February
23, 2005. However, as described in Note 8, the assets of the sawmill are
encumbered. The Company is finalizing refinancing of the sawmill facility.


NOTE 4 - INCOME TAXES

Income tax benefit consists of the following:

                                                      10/01/2004-
                                                      12/31/2004
Deferred:
         Federal                                     $   235,160
                                                     ===========

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

                                      F-7
<PAGE>

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 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.


NOTE 6  - RELATED PARTY TRANSACTIONS
During the three months ended December 31, 2004, September 30, 2004 and June 30,
2004, Tim Bumgarner, an officer, director and majority stockholder of the
Company, was paid consulting fees in the amounts of $ 0 and $9,500,
respectively.


NOTE 7 - COMMITMENTS AND CONTINGENCIES

As described in Note 2, 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.

                                      F-8
<PAGE>

NOTE 7 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

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
         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 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 8 - SUBSEQUENT EVENTS

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.

Holders of $ 454,000 of the convertible notes payable (Note 3) have agreed to
exercise their conversion rights to receive newly issued restricted shares of
the Company's common stock. Holders of $ 20,000 of the convertible notes payable
have entered into agreements to extend the due dates of the notes an additional
six month period.

                                      F-9
<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 SIX MONTHS ENDED DECEMBER 31, 2004. 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 SUBCAPTION "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 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 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.

                                       3
<PAGE>

         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.

         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.

                                       4
<PAGE>

         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 December 31, 2004, we had a working capital deficit of
$2,992,275. Over the next 12 months, in addition to the Rock Valley, Iowa
facility described above, we expect to close on a contract to purchase a saw
mill and pallet manufacturing facility in Nebraska 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 nations 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.

                                       5
<PAGE>

         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.

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<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.

         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, 2004, we had total
current assets of $343,748 and working capital deficit of $2,992,275. 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. 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
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 February
22, 2005, the last reported sale price of our common stock on the OTC Bulletin
Board was $0.70 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.

                                       7
<PAGE>

         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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<PAGE>

                           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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<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 23, 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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