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

                                  FORM 10-KSB/A
                               (Amendment No. 1)

                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                     FOR THE FISCAL YEAR ENDED JUNE 30, 2005


                        COMMISSION FILE NUMBER 333-99449

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

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

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

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



         CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS  REQUIRED TO BE FILED BY
SECTION 13 OR 15(D) OF THE  EXCHANGE  ACT OF 1934  DURING THE PAST 12 MONTHS (OR
FOR SUCH SHORTER  PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS),
AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
                                    YES  X  NO __
                                        ---

         AS OF NOVEMBER 14, 2005, THE COMPANY HAD 24,534,651 SHARES OF ITS $.001
PAR VALUE COMMON STOCK ISSUED AND OUTSTANDING.

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

         INDICATE BY CHECK MARK WHETHER THE  REGISTRANT  IS A SHELL  COMPANY (AS
DEFINED IN RULE 12B-2 OF THE ACT):
YES__ NO  X
         ---


<PAGE>





                                TABLE OF CONTENTS

                                     PART I
<TABLE>
<CAPTION>

<S>           <C>                                                                                 <C>
ITEM 1.       DESCRIPTION OF BUSINESS .........................................................    3
ITEM 2.       DESCRIPTION OF PROPERTY .........................................................    6
ITEM 3.       LEGAL PROCEEDINGS ...............................................................    6
ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .............................    6

                                     PART II

ITEM 5.       MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ........    7
                ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION .......................    8
ITEM 7.       FINANCIAL STATEMENTS ............................................................   14
ITEM 8.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE ....................................................................   15
ITEM 8A.      CONTROLS AND PROCEDURES .........................................................   15

                                    PART III

ITEM 9.       DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT .............................   16
ITEM 10.      EXECUTIVE COMPENSATION ..........................................................   18
ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
                RELATED STOCKHOLDER MATTERS ...................................................   18
ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ..................................   19

                                     PART IV

ITEM 13.      EXHIBITS ........................................................................   20
ITEM 14.      PRINCIPAL ACCOUNTANT FEES AND SERVICES ..........................................   xx
SIGNATURES ....................................................................................   21
</TABLE>


EXPLANATORY NOTE

This Annual Report on Form 10-KSB/A  amends our Annual Report on Form 10-KSB for
the year ended June 30, 2005,  as filed by us on October 17, 2005,  and is being
filed to reflect the  restatement of our Financial  Statements.  The restatement
reflects  adjustments  to include the  impairment of assets and reserve for loss
contingencies  as required by  generally  accepted  accounting  principles.  The
restatement also contains a revised  auditor's opinion that expresses an opinion
of our  financial  statements.  To  that  end,  changes  have  been  made to the
disclosure  in Item 7 of Part II to reflect  the  matters  discussed  above.  In
addition,  the 10-KSB/A  also adds  supplemental  disclosure  with respect to an
acquisition being negotiated by us in Nebraska for a new wood products facility.



<PAGE>


PART I

ITEM 1.  DESCRIPTION OF BUSINESS

         ORGANIZATION

         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.

         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  approved  a change  in our  corporate  name to
"American  Pallet  Leasing,  Inc.",  effective  as  of  November  24,  2004  and
subsequently changed the company's fiscal year-end to June 30.

         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 intend to acquire  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 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
2006.

         OPERATIONS

         On August 13, 2004, the Company  acquired its initial  operating entity
by purchasing the assets of G&G/Cherokee Wood, Inc.("G&G"), a sawmill located in
Blacksburg, South Carolina. The terms of the acquisition included a cash payment
of  $550,000  and an  unsecured  promissory  note  in  the  original  amount  of
$2,750,000,  for a total purchase  price of $3,300,000.  This note is payable in
five monthly  installments  of $30,000 and the remaining  balance was originally
due on February  23, 2005 (see note 7).  However,  as  described  in Note 7, the
assets of


                                      -3-
<PAGE>

("G&G") are  encumbered.  The  Company  has made  payments of $ 960,000 in cash,
lumber, and unprocessed logs 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 ("G&G"). 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 approximately $1,500,000 as of June 30, 2005. A portion
of the  purchase  note payment was to be made  directly to the previous  owner's
lender in  exchange  for a release of all liens or  encumbrances  on the sawmill
assets.

          On June 9, 2005,  the Company  reported  that a temporary  shutdown of
("G&G")  accelerated a planned overhaul of the same unit,  originally  scheduled
for later in the  calendar  year.  The  Company  was in the  process  of raising
capital to increase  capacity  at G&G and to effect  further  acquisitions.  The
Company elected to temporarily  shut down G&G's  operations in order to conserve
cash and convert production from pine to more profitable  hardwood.  However, on
September 1, 2005, the Company decided to permanently abandon the sawmill and to
write down the value of this asset  effective as of June 30, 2005. (SEE ITEM 3 -
LEGAL PROCEEDINGS).

          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 debt
and equity  securities.  Since our inception we conducted the private  placement
sale of our debt and equity  securities  for the  approximate  gross proceeds of
$2,172,500.

         As of June 30, 2005, we had a working  capital  deficit of $ 5,097,435.
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.  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.

         RECENT DEVELOPMENTS

         On August  23,  2005 James F.  Crigler  was named  President  and Chief
Executive Officer of the Company.  Mr. Crigler,  a Director of the Company since
April 2004, has played a key role in the financial and management development of
APL during the past year. With an extensive  background in Architectural  design
and  building  construction,  Mr.  Crigler  was  responsible  for the design and
development  of several  medium to large size  subdivisions  in the  Greater St.
Louis area in the  mid-fifties.  Due to his pioneering  efforts with  innovative
construction  techniques,  in the Saint Louis  market,  he and his  construction
company  earned the title  "builder of the year" for 1956.  In 1961 Mr.  Crigler
worked with a major glass company to develop its contract division,  and in 1968
he formed the glass and glazing division for Crescent  Erection  Company,  which
was  engaged  in  erecting  curtain  walls and  windows  for major  construction
projects  throughout  the United States.  Expanding on his experience  with such
projects,  Mr.  Crigler  founded  a  company  in  1972  that  developed  various
techniques for installation of curtain walls and high-rise building cladding and
windows.  Since 1980, Mr. Crigler has been a partner in C & L Associates,  a tax
accounting firm with offices in Glenview, Illinois and St. Petersburg,  Florida.
He is also a director of Cala Group,  Inc., which owns certain U.S. and Canadian
rights pertaining to the products of Bio-Claire International, a manufacturer of
natural  water  purification  products and systems.  Timothy R.  Bumgarner  will
continue as APL's  Chairman  of the Board,  and will focus  primarily  on market
development.

         On October 13, 2005, the company  announced that its Board of Directors
will be expanded to five members with the  addition of two  directors,  James A.
Jeffery and Douglas H.  Peterson.  James A. Jeffery has been owner and President
of Insarch Group Ltd. since 1987. Insarch,  headquartered in Toronto, Canada, is
a  privately  held,  independent,   insurance/asset,  risk  management  services
corporation  focused  on  providing  business


                                      -4-
<PAGE>

planning/organization,   business  financing,   risk  and  loss  mitigation  and
strategic risk services to lending  institutions and their clients.  The Company
also conducts  business in the U.S. through its main office in Oakland,  Ca. Mr.
Jeffery is also  Managing  Director of Mercedis  Canada  Ltd.,  specializing  in
alternative financial structures for its business clients.  Prior to his current
position with Insarch,  Mr. Jeffery had been Associate Partner with that Company
since 1982. A Graduate of Loyalist and Queens University, he began his career as
a design engineer with Northern  Telecom in Toronto.  Mr. Jeffery is a member of
many  national  organizations  in  Canada  and the  United  States.  Douglas  H.
Peterson,  CPA, has been the owner of his own  accounting  firm since 1992.  His
company serves numerous clients in  manufacturing,  construction,  insurance and
retail industries.  Prior to that Mr. Peterson was a  lecturer/advisor  at North
Dakota  State  University,  teaching  accounting,  tax and  information  systems
courses from 1979 to 1992. During that time he also was controller for both, the
Federal Machine Company in West Fargo, ND and Sportland,  Inc. of Moorhead,  Mn.
Mr.  Peterson  holds  degrees from North Dakota State  University  and Concordia
College and is a member of the North Dakota Society of CPAs

         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.

         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.


                                      -5-
<PAGE>

         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.


ITEM 2.  DESCRIPTION OF PROPERTY

The Company's  executive  offices are located at 950 North Milwaukee Ave, Number
328,  Glen  View,  Illinois  60025.  The  company  owns 12 acres of land with an
estimated  value of over  $700,000  in Rock  Valley,  Iowa.  Construction  is in
progress on a 25,000 square foot Wood / Steel Pallet  production  facility.  The
Rock  Valley,  Iowa  site  will be the home of the  Company's  Midwest  Regional
Headquarters.

ITEM 3.  LEGAL PROCEEDINGS

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

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

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


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        Not applicable

                                      -6-
<PAGE>

PART II

ITEM 5.  MARKET  FOR  COMMON  EQUITY,  RELATED  STOCKHOLDER  MATTERS  AND  SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

The  Company's  Common Stock is traded on the NASD OTC Bulletin  Board under the
symbol APLS. During 2005 both bid and ask quotations have appeared  regularly on
the OTC Bulletin Board. The following bid quotations have been reported on Yahoo
Finance for the period  beginning  December 31, 2004,  and ending  September 30,
2005, for the Company's stock:

                                          High              Low
Quarter Ended December 31, 2004          $6.91             $0.60
Quarter Ended March 31, 2005             $1.05             $0.60
Quarter Ended June 30, 2005              $1.01             $0.22
Quarter Ended September 30, 2005         $0.35             $0.07


Such quotations reflect inter-dealer prices, without retail markup,  markdown or
commission.   Such  quotes  are  not   necessarily   representative   of  actual
transactions  or of the  value of the  Company's  securities,  and  are,  in all
likelihood,  not based upon any recognized  criteria of securities  valuation as
used in the investment banking community.


                                      -7-
<PAGE>


As of June 30, 2005, the Company had approximately 140 shareholders of record of
the  Company's  common stock.  However,  a number of the shares of the Company's
common  stock  are held in  "street  name"  and are  therefore  held by  several
beneficial  owners.  The Company  estimates that it has a total of approximately
170 beneficial shareholders.

ITEM 6.  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 YEAR ENDED JUNE 30, 2005.  THE  FOLLOWING
DISCUSSION  MAY  BE  UNDERSTOOD   MORE  FULLY  BY  REFERENCE  TO  THE  FINANCIAL
STATEMENTS,   NOTES  TO  THE  FINANCIAL  STATEMENTS,  THE  HISTORICAL  FINANCIAL
STATEMENTS OF OUR RECENTLY ACQUIRED SUBSIDIARY,  AMERICAN PALLET LEASING,  INC.,
AN IOWA CORPORATION ("APL-IOWA"),  CONTAINED IN THE CURRENT REPORT ON FORM 8-K/A
FILED ON OCTOBER 21, 2004.


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

OVERVIEW


REORGANIZATION WITH LITERARY PLAYPEN

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


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

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

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

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


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

                                      -8-
<PAGE>

PLAN OF OPERATION

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

      After extensive evaluation of the potential profitability of the facility,
coupled with the operating losses that we have incurred to date, we have decided
to either renegotiate the purchase price of the saw mill assets or terminate the
contract and abandon the facility and concentrate on pallet  production in other
locations.

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

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

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

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

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

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

CRITICAL ACCOUNTING POLICIES

REVENUE RECOGNITION

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

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

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

CASH AND CASH EQUIVALENTS

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

ACCOUNTS RECEIVABLE

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

PROPERTY AND EQUIPMENT

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

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

                                      -9-
<PAGE>

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

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

INCOME TAXES

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

CONCENTRATIONS OF CREDIT RISK

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

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

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

USE OF ESTIMATES

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

INCOME (LOSS) PER SHARE

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

REVENUE RECOGNITION POLICY

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

INCOME TAXES

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


RECENT ACCOUNTING PRONOUNCEMENTS:

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

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

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

                                      -10-
<PAGE>

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

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

SFAS  153 - In  December  2004,  the FASB  issued  SFAS No.  153  "Exchanges  of
Non-monetary Assets - an amendment of APB Opinion No. 29" ("SFAS 153"). SFAS 153
replaces the  exception  from fair value  measurement  in APB Opinion No. 29 for
non-monetary  exchanges of similar  productive  assets with a general  exception
from fair value  measurement  for exchanges of  non-monetary  assets that do not
have commercial  substance.  A non-monetary exchange has commercial substance if
the future cash flows of the entity are  expected to change  significantly  as a
result of the exchange.  SFAS 153 is effective for all interim periods beginning
after June 15, 2005.



                                      -11-
<PAGE>




                                  RISK FACTORS

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

         LIQUIDITY AND CAPITAL  RESOURCES.  Our current working capital will not
be  enough  to  sustain  our  operations,  and if we  cannot  obtain  additional
financing,  we will not be able to continue to fund our expansion  plans.  As of
June 30, 2005,  we had total  current  assets of $ 26,261 and a working  capital
deficit of $  5,097,435.  Since then our working  capital has  decreased  due to
continuing  losses  from  operations.  We  believe  that we require a minimum of
$5,000,000  in order  to fund our  entire  planned  operations  over the next 12
months. To that end, we intend to acquire additional capital through the private
placement sale of our securities and borrowing from various lending  facilities.
Management has made plans to implement  certain  acquisitions  and joint venture
agreements  that look forward to the  complementing  of the  Company's  business
plan.  Part of these  plans  include  the  acquiring  of a  sawmill  and  pallet
manufacturing  business in North Bend, Nebraska. The company has issued a Letter
of Intent to  purchase  the  facility  and has  received  a term  sheet  from an
investment  group  indicating  the  availability  of  financing  of the project.
Additionally, the Company is negotiating with an investment group to finance the
completion of their Rock Valley, Iowa facility.  We have previously reported the
$100,000  six-year 4% loan from the  Northwest  Iowa  Planning  and  Development
Commission  and the note  agreement with Brittany  Capital  Management  Limited.
whereby  Brittany loaned the Company  $250,000.  However,  other than the above,
there  are no  commitments  or  agreements  on the  part of  anyone  to  provide
financing or purchase our securities. As a result of these financial conditions,
the report of our independent  certified public  accounting firm on our June 30,
2005  consolidated   financial  statements  includes  an  explanatory  paragraph
indicating that these  conditions raise  substantial  doubt about our ability to
continue as a going concern.

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

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

         WE DO NOT HAVE AN ACTIVE  TRADING  MARKET  FOR OUR  STOCK.  Our  common
shares are traded on the OTC Bulletin  Board under the symbol "APLS." On October
13, 2005,  the last  reported sale price of our common stock

                                      -12-
<PAGE>

on the OTC Bulletin Board was $0.10 per share.  However,  we consider our common
stock to be "thinly  traded" and any last reported sale prices may not be a true
market-based valuation of the common stock.

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


                                      -13-
<PAGE>

<TABLE>
<CAPTION>

ITEM 7.  FINANCIAL STATEMENTS                                                                                  PAGE(S)

<S>                                                                                                            <C>
Consolidated Balance Sheets at June 30, 2005 and June 30, 2004..................................................F-3
Consolidated Statements of Operations for the years
               ended June 30, 2005 and June 30, 2004 and for the period  from
               inception (April 21, 1997) through June 30, 2005.................................................F-4
Consolidated Statements of Cash Flows for the years ended
               June 30, 2005 and June 30, 2004 and for the period from inception
               (April 21,1997) through June 30, 2005............................................................F-5
Consolidated Statements of Shareholders Equity for the years ended
               June 30, 2005 and 2004 and for the period from  inception
               (April 21,1997) through June 30, 2005............................................................F-6
Notes to Consolidated Financial Statements......................................................................F-7
</TABLE>



                                      -14-
<PAGE>





ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

None.


ITEM 8A. CONTROLS AND PROCEDURES

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

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



                                      -15-
<PAGE>

PART III

ITEM 9.  DIRECTORS,   EXECUTIVE   OFFICERS,   PROMOTERS  AND  CONTROL   PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT


The Executive Officers and Directors of the Company are:


        Name          Age               Position

Timothy Bumgarner     49    Chairman of the Board of Directors
James F. Crigler      77    President and Chief Executive Officer and Director
Byron M. Hudson       60    Chief Financial Officer
Robert Vinson         67    Director
James A. Jeffery      53    Director
Douglas Peterson      55    Director



Each of the above officers and directors shall hold office until the next annual
meeting of our shareholders or until a successor is elected and qualified.


TIMOTHY R. BUMGARNER.  Mr.  Bumgarner has been our Chairman of the Board,  since
November,  2004.  He served as our President  and Chief  Executive  Officer from
November 2004 until August 23, 2005. From 1994 to 1998, Mr.  Bumgarner owned and
operated SPI  Manufacturing,  a small  manufacturing  company he founded,  which
generated more than $5 million in annual sales. From 1998 to 2003, Mr. Bumgarner
owned and  operated  EPI, a design  and  consulting  business  focused on pallet
systems and other material handling systems.  EPI's clients included  Tropicana,
Nabisco,  Toyota,  Keebler,  Burlington  Northern  and Santa Fe Railway,  Thermo
Dynamics,   Certified  Handling  Systems,   Monsanto,  Merck,   Hoffman-LaRoche,
Amerimax, and many others.

JAMES CRIGLER. Mr. Crigler has been a director of the Company since April, 2004,
and President and Chief  Executive  Officer since August 23, 2005. From November
2003 to present,  Mr.  Crigler  has  assisted in our  development.  Mr.  Crigler
currently is the  President,  director and majority  shareholder  of Cala Group,
Inc.,  which is the owner of certain  rights  throughout  the United  States and
Canada, primarily the products of Bio-Claire International. From January 2000 to
present,  Mr.  Crigler has been a partner of C & L Associates,  a tax accounting
firm that has offices in Glenview, Illinois and St. Petersburg,  Florida. He has
an extensive  background in the construction  industry  including  Architectural
design and  building  construction.  Mr.  Crigler has been  responsible  for the
design and  development  of several  medium to large  size  subdivisions  in the
Greater St. Louis area including  subdivisions  in Cool Valley and St.  Charles,
Missouri.

BYRON  HUDSON.  Mr. Hudson has been the Chief  Financial  Officer of the Company
since  September  2004. From July 2002 to April 2004, he was the Chief Financial
Officer of  BurgerBusters,  Inc.,  a chain of 82 Taco Bell,  Pizza Hut,  and KFC
franchised restaurants in Virginia, North Carolina, West Virginia, and Maryland.
From November 1995 to July 2002 he was the Controller of Eurpac Warehouse Sales,
an international  wholesale  organization  supplying audio,  video, and computer
software to U. S. military retail exchanges throughout the world.

ROBERT VINSON.  Mr. Vinson has been a Director of American Pallet  Leasing,  Inc
since 2004. From 1976 to 1990, Mr. Vinson served as chief  administrator  of the
Northwest  for Chapman  University.  From 2000 to present,  Mr. Vinson has owned
Bridgeport  Motors,  Inc. From 2001 to present he is a Senior Vice  President of
Cala Group, Inc. as well as a shareholder in United States Building Panels, Inc.
(USBP),  a housing  component  manufacturing  firm, which is also a licensed and
bonded  construction  company.  Mr.  Vinson has an extensive  background  in the
manufacture  and sale of panel  products,  including the development of the USBP
"Privacy  Wall".  He is also owner of  Bridgeport  Motors,  Inc.,  an automobile
dealership that is located in Lakewood,  Washington.  Mr. Vinson holds a B.A. in
Business  Administration  from Pacific Lutheran  University;  an M.B.A. from the
University  of Puget  Sound;  and is a Ph. D candidate in  Leadership  and Human
Behavior with United States  International  University,  San Diego,



                                      -16-
<PAGE>

California.  While attending college,  Mr. Vinson worked as an employee of Puget
Sound Hospital,  holding the position of materials manager. The responsibilities
of this  position  included  the  management  and  procurement  of all  hospital
supplies including pharmaceutical drugs.

JAMES A. JEFFERY. Mr. Jeffery has been a Director since October 13, 2005 and has
been  owner  and   President  of  Insarch  Group  Ltd.   since  1987.   Insarch,
headquartered   in  Toronto,   Canada,   is  a  privately   held,   independent,
insurance/asset,  risk  management  services  corporation  focused on  providing
business planning/organization, business financing, risk and loss mitigation and
strategic risk services to lending  institutions and their clients.  The Company
also conducts  business in the U.S. through its main office in Oakland,  Ca. Mr.
Jeffery is also  Managing  Director of Mercedis  Canada  Ltd.,  specializing  in
alternative financial structures for its business clients.  Prior to his current
position with Insarch,  Mr. Jeffery had been Associate Partner with that Company
since 1982. A Graduate of Loyalist and Queens University, he began his career as
a design engineer with Northern  Telecom in Toronto.  Mr. Jeffery is a member of
many national organizations in Canada and the United States.

DOUGLAS H.  PETERSON,  CPA. Mr.  Peterson has been a Director  since October 13,
2005 and has been the owner of his own  accounting  firm since 1992. His company
serves numerous  clients in  manufacturing,  construction,  insurance and retail
industries.  Prior to that Mr. Peterson was a  lecturer/advisor  at North Dakota
State University,  teaching accounting, tax and information systems courses from
1979 to 1992.  During  that time he also was  controller  for both,  the Federal
Machine  Company in West Fargo,  ND and  Sportland,  Inc. of  Moorhead,  Mn. Mr.
Peterson holds degrees from North Dakota State University and Concordia  College
and is a member of the North Dakota Society of CPAs

Except as set forth  herein,  no officer or director of the Company has,  during
the last five years: (i) been convicted in or is currently  subject to a pending
criminal  proceeding;  (ii) been a party to a civil  proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is  subject  to a  judgment,  decree  or  final  order  enjoining  future
violations of, or prohibiting or mandating  activities subject to any Federal or
state  securities  or banking laws  including,  without  limitation,  in any way
limiting  involvement  in any business  activity,  or finding any violation with
respect  to such law,  nor (iii) has any  bankruptcy  petition  been filed by or
against the business of which such person was an executive  officer or a general
partner,  whether  at the  time of the  bankruptcy  of for the two  years  prior
thereto.

CODE OF ETHICS

Our board of  directors  adopted a Code of Ethics  which  covers  all  executive
officers of our company and its  subsidiaries.  The Code of Ethics requires that
senior management avoid conflicts of interest;  maintain the  confidentiality of
information  relating to our company;  engage in  transactions  in shares of our
common stock only in compliance  with  applicable  laws and  regulations and the
requirements set forth in the Code of Ethics; and comply with other requirements
which are intended to ensure that such  officers  conduct  business in an honest
and ethical  manner and otherwise act with integrity and in the best interest of
our company.

All our  executive  officers  are  required to affirm in writing  that they have
reviewed and understand the Code of Ethics.

AUDIT COMMITTEE

We do not  currently  have an audit  committee but plan to create one as soon as
possible.

COMPENSATION OF THE BOARD OF DIRECTORS

Directors who are also our employees do not receive additional  compensation for
serving on the Board or its committees.  Non-employee directors are not paid any
annual cash fee. In addition,  directors  are entitled to receive  options under
our 2005 Stock Option Plan. All directors are  reimbursed  for their  reasonable
expenses  incurred in attending Board meetings.  We intend to procure  directors
and officers liability insurance.

                                      -17-
<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION

The executive compensation paid for the year ended June 30, 2005 is as follows:


<TABLE>
<CAPTION>
                                                                                Long term compensation
                                                                                Awards                      Payouts
Name and                            Salary*        Bonus      Other Annual      Securities Underlying       LTIP       All Other
Principal Position                                            Compensation      Options/ SARs               Payouts    Compensation
---------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>        <C>               <C>                         <C>        <C>
Byron M. Hudson, CFO                $ 113,750.00*    -            -                   -                        -          -
Timothy R. Bumgarner, Chairman         22,500.00     -            -                   -                        -          -
James F. Crigler, Director/ CEO        24,500.00     -            -                   -                        -          -
</TABLE>


STOCK OPTIONS

In 2005, the Company approved its 2005 Stock Incentive Plan. As of June 8, 2005,
we have not issued any securities under this Plan.

EMPLOYMENT AGREEMENTS


We have entered into an amended employment  agreement with Mr. Byron Hudson, our
Chief Financial  Officer.  This agreement  became effective on June 29, 2005 and
provides for an annual  salary of not less than  $150,000 per year until October
2007 at  which  time his  salary  shall  increase  to  $165,000  per  year,  and
increasing by $25,000 per year in 2008 and 2009. Mr. Hudson shall be entitled to
receive cash bonuses solely at the discretion of the Compensation  Committee and
shall be issued 500,000 shares of our restricted common stock.


Upon  execution  of  the  agreement,   Mr.  Hudson  received  90,909  shares  of
unregistered  common stock. This contract can be terminated at the discretion of
the Board of Directors if it is  considered  in the best interest of the Company
to do so. If the  contract is  terminated  by the Company,  a severance  payment
equal to one and a half times the then current  annual salary is provided for in
the contract.



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of June 30, 2005,  our  authorized  capitalization  consisted of  100,000,000
shares  of common  stock,  par value  $.001 per share and  10,000,000  shares of
preferred  stock,  $.001 par value.  As of June 30, 2005,  there were 24,534,651
shares  of  our  common  stock  outstanding,  all  of  which  were  fully  paid,
non-assessable  and entitled to vote and no shares of preferred  stock have been
issued.  Each share of our common stock  entitles its holder to one vote on each
matter submitted to the shareholder.

The following table sets forth, as of June 30, 2005, the number of shares of our
common  stock  owned by (i) each  person  who is known by us to own of record or
beneficially five percent (5%) or more of our outstanding  shares,  (ii) each of
our  directors,  (iii)  each  of our  executive  officers  and  (iv)  all of our
directors and executive officers as a group. Unless otherwise indicated, each of
the persons  listed below has sole voting and  investment  power with respect to
the shares of our common stock beneficially owned.

                                      -18-
<PAGE>

Name of Beneficial Owner (1)       Number of Shares        Percentage of Shares
                                Benefically Owned (2)     Beneficially Owned (3)
--------------------------------------------------------------------------------
Tim Bumgarner(4)                      6,343,820                  31.79%
Byron Hudson                            225,000                   1.13%
James Crigler (5)                     1,700,000                   8.52%
Robert Vinson (6)                       100,000                      *
Kevin Bumgarner (7)                   3,000,000                  15.03%
Margaret Bumgarner (8)                1,500,000                   7.52%
--------------------------------------------------------------------------------
All officers and Directors
  as a group (4 persons)              8,368,820                  41.94%

------------------------------
     * Less than one percent.

(1)   Unless  otherwise  indicated,  the address of each person  listed below is
      c/oAmerican  Pallet Leasing,  Inc., at 950 NORTH MILWAUKEE AVE, NUMBER 328
      GLENVIEW, ILLINOIS 60025.

(2)   Pursuant  to the rules and  regulations  of the  Securities  and  Exchange
      Commission, shares of common stock that an individual or group has a right
      to acquire  within 60 days pursuant to the exercise of options or warrants
      are deemed to be outstanding  for the purposes of computing the percentage
      ownership  of  such  individual  or  group,  but  are  not  deemed  to  be
      outstanding for the purposes of computing the percentage  ownership of any
      other person shown in the table.

(3)   Figures may not add up due to rounding of percentages.

(4)   Does not include an aggregate of 4,575,000  shares of common stock held by
      various members of Mr.  Bumgarner's  family,  including Kevin and Margaret
      Bumgarner.

(5)   Includes  1,500,000  shares of common stock owned by Cala Group, an entity
      which is owned by James Crigler.

(6)   Excludes  1,500,000  shares of common stock owned by Cala Group, an entity
      which Mr. Vinson is a shareholder.

(7)   Kevin  Bumgarner  is the  son  of  Mr.  Bumgarner,  our  President,  Chief
      Executive Officer and Chairman.


(8)   Margaret  Bumgarner is the wife of Mr.  Bumgarner,  our  President,  Chief
      Executive Officer and Chairman.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


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

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

                                      -19-
<PAGE>

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

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Under the  securities  laws of the United States,  our directors,  our executive
(and certain other) officers, and any persons holding ten percent or more of our
shares of common  stock must report on their  ownership  of our shares of common
stock  and  any  changes  in  that  ownership  to the  Securities  and  Exchange
Commission.  Specific due dates for these reports have been established.  During
the fiscal year ended June 30,  2005,  based  solely on a review of filings made
with the SEC, we believe that all reports  required to be filed by Section 16(a)
were filed on a timely basis.  The Company's  current officers and directors are
currently working to make all appropriate  filings in order to be compliant with
Section 16(a)

ITEM 13. EXHIBITS.

         (A)  INDEX TO EXHIBITS

              Exhibit 23.2              Consents of Experts and Counsel*

              Exhibit 31.1              Section 302 Certification*

              Exhibit 32.1              Section 906 Certification*

---------------------------------
*Filed herewith


                                      -20-
<PAGE>



                                   SIGNATURES


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


                                     American Pallet Leasing, Inc.
                                     (Registrant)


Dated:  November 14, 2005            By:  /s/ James Crigler
                                          --------------------------------------
                                          James Crigler,
                                          President and Chief Executive Officer


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




                                      -21-
<PAGE>


<TABLE>
<CAPTION>
                          AMERICAN PALLET LEASING, INC.
<S>                                                                                            <C>

Consolidated Balance Sheets at June 30, 2005 and June 30, 2004 .............................   F-1
Consolidated Statements of Operations for the years
               ended June 30, 2005 and June 30, 2004 and for the period  from
               inception (April 21, 1997) through June 30, 2005 ............................   F-2
Consolidated Statements of Cash Flows for the years ended
               June 30, 2005 and June 30, 2004 and for the period from inception
               (April 21,1997) through June 30, 2005 .......................................   F-4
Consolidated Statements of Shareholders Equity for the years ended
               June 30, 2005 and 2004 and for the period from  inception
               (April 21,1997) through June 30, 2005 .......................................   F-5
Notes to Consolidated Financial Statements .................................................   F-6
</TABLE>






<PAGE>


                [LANGLEY, WILLIAMS & COMPANY, L.L.C. LETTERHEAD]


                          INDEPENDENT AUDITOR'S REPORT

The Board of Directors
American Pallet Leasing, Inc.
(A Development Stage Company)
Glenview, Illinois

We have audited the accompanying balance sheets of American Pallet Leasing, Inc.
(A  Development  Stage  Company),  as of June 30, 2005 and June 30, 2004 and the
related statement of loss,  stockholders'  deficit and cash flows for the twelve
months  ended June 30,  2005 and from the date of  inception  (April  21,  1997)
through June 30, 2004. These financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  report  on  these  financial
statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of American Pallet Leasing,  Inc.
as of June 30, 2005 and June 30, 2004 and the results of operations,  changes in
stockholders'  deficit and cash flows for the twelve  months ended June 30, 2005
and from  the date of  inception  (April  21,  1997)  through  June 30,  2004 in
accordance with accounting principles generally accepted in the United States of
America.

The  accompanying  financial  statements  had been  prepared  assuming  that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has suffered recurring losses from operations
and has a working capital deficiency and deficit in stockholders'  equity,  that
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  Management's  plans in regard to these  matters are also  described in
Note 1. The  financial  statements  do not  include any  adjustments  that might
result from the outcome of this uncertainty.

In our report dated  October 13, 2005,  we issued a disclaimer of opinion on the
financial  statements  due to the  Company  not  maintaining  certain  customary
accounting records and supporting documents relating to transaction,  nor is the
system of internal control  adequate to provide  safeguards of assets and assure
proper recording of transactions. Since October 13, 2005, we were able to extend
our  procedures  sufficiently  to  determine  the extent to which the  financial
statements may have been affected by these  conditions.  As explained in Note 9,
the company has restated its 2005 financial statements to include the impairment
of assets and reserve for loss  contingencies as required by generally  accepted
accounting  principles.  Accordingly,  our present opinion on the 2005 financial
statements, as presented herein, differs from that previously issued.

/s/ Langley, Williams & Company, L.L.C.

Lake Charles, Louisiana
November 11, 2005



<PAGE>

                          AMERICAN PALLET LEASING, INC.
                          (A Development Stage Company)
                                 BALANCE SHEETS
                                      As of
<TABLE>
<CAPTION>
                                                                                                  June 30,                 June 30,
                                                                                                    2005                     2004
                                                                                                 -----------            -----------
<S>                                                                                              <C>                    <C>
Current Assets:
       Cash and cash equivalents                                                                 $    26,261            $    25,304
       Accounts Receivable                                                                                --
       Inventories                                                                                        --
       Marketable Securities

       Prepaid Expenses                                                                                   --                     --
                                                                                                 -----------            -----------
                   Total current assets                                                               26,261                 25,304
                                                                                                 -----------            -----------

Property, Plant & Equipment (net)                                                                    235,164                  9,256

Deferred Tax Assets                                                                                       --                225,733

Other Assets                                                                                          17,693                102,250

                                                                                                 -----------            -----------
                   Total Assets                                                                  $   279,118            $   362,543
                                                                                                 ===========            ===========


Current Liabilities:
       Notes payable                                                                             $   457,938            $   395,500
       Liabilities related to discounted operations                                                2,240,879                     --
       Accounts payable and accrued liabilities                                                      375,269                 76,809
       Reserve for contingencies                                                                   2,049,610                     --
                                                                                                 -----------            -----------
                   Total current liabilities                                                       5,123,696                472,309
                                                                                                 -----------            -----------

Commitments and Contingencies

Stockholders' Deficit:
       Common stock; $.001 par value; 100,000,000 authorized;
               24,534,651 issued and outstanding                                                      24,535                  9,732
       Preferred stock; $.001 par value; 10,000,000 authorized;
       No shares issued or outstanding
       Additional paid-in capital                                                                  4,321,684                390,268
       Accumulated deficit                                                                        (9,190,797)              (509,766)

                                                                                                 -----------            -----------
       Total Stockholders' Deficit                                                                (4,844,578)              (109,766)
                                                                                                 -----------            -----------

                                                                                                 -----------            -----------
Total Liabilities and Stockholders' Deficit                                                      $   279,118            $   362,543
                                                                                                 ===========            ===========
</TABLE>

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


                                       F-1
<PAGE>

                          AMERICAN PALLET LEASING, INC.
                          (A Development Stage Company)
                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                                 Cumulative                              From
                                                                                   During           July 1, 2004      Inception
                                                                                 Development          Through           Through
                                                                                    Stage           June 30, 2005     June 30, 2004
                                                                                ------------        -------------     --------------

<S>                                                                             <C>                 <C>                 <C>
SALES                                                                                     0                   0                   0
COST OF SALES                                                                             0                   0                   0

                                                                                -----------         -----------         -----------
GROSS PROFIT                                                                              0                   0                   0
                                                                                -----------         -----------         -----------

GENERAL & ADMINISTRATIVE EXPENSES:

Plant Expenses                                                                  $    45,286         $    45,286         $        --
Consultants                                                                       2,574,068           2,238,596             335,472
Organization costs                                                                  253,683              57,039             196,644
Office expense                                                                      717,584             688,832              28,752

                                                                                -----------         -----------         -----------
      Total general and administrative expenses                                   3,590,621           3,029,753             560,868
                                                                                -----------         -----------         -----------

OTHER INCOME (EXPENSES):
      Gain on sale of securities                                                     23,198              23,198                  --
      Loss on abandonment of investment                                            (120,000)                 --            (120,000)
      Reserve for contingencies                                                  (2,049,610)         (2,049,610)                 --
      Other Income                                                                       --                  --                  --
      Interest income                                                                   716                 716                  --
      Interest expense                                                              (99,107)            (44,476)            (54,631)

                                                                                -----------         -----------         -----------
                Total other income (expense)                                     (2,244,803)         (2,070,172)           (174,631)
                                                                                -----------         -----------         -----------

Loss from continuing operations before income taxes                             $(5,835,424)        $(5,099,925)        $  (735,499)
      Income tax benefit (expenses)                                              (1,140,827)         (1,366,560)            225,733
                                                                                -----------         -----------         -----------
Loss from continuing operations                                                 $(6,976,251)        $(6,466,485)        $  (509,766)
                                                                                -----------         -----------         -----------

DISCONTINUED OPERATIONS:
Loss from discontinued sawmill operations                                       $  (170,574)        $  (170,574)        $        --
Loss from asset impairment (net of taxes)                                        (2,101,967)         (2,101,967)                 --
                                                                                -----------         -----------         -----------
Net loss from discontinued operations before income taxes                        (3,355,373)         (2,272,541)                 --
      Income tax benefit                                                          1,140,827              57,995                  --
                                                                                -----------         -----------         -----------
Net loss from discontinued operations                                            (2,214,546)         (2,214,546)                 --
                                                                                -----------         -----------         -----------
NET LOSS                                                                        $(9,190,797)        $(8,681,031)        $  (509,766)
                                                                                ===========         ===========         ===========

BASIC LOSS PER COMMON SHARE:
          Weighted average number of shares                                                          18,696,823              80,545

          Net loss per share from continuing operations                                                                 $        --
          Net loss per share from discontinued operations                                           $    (0.118)
                                                                                                    -----------         -----------
          Net loss per share                                                                        $    (0.464)        $   (0.0264)
                                                                                                    ===========         ===========


FULLY DILUTIVE LOSS PER COMMON SHARE:
          Weighted average number of shares                                                          18,716,823          19,347,978

          Net loss per share from continuing operations                                                                 $        --
          Net loss per share from discontinued operations                                           $    (0.118)
                                                                                                    -----------         -----------
          Net loss per share                                                                        $    (0.464)        $   (0.0226)
                                                                                                    ===========         ===========
</TABLE>

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


                                      F-2
<PAGE>

                                      F-3
<PAGE>


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

                        Statements of Cash Flows
                       For the Periods Indicated
<TABLE>
<CAPTION>
                                                                                Cumulative         Year-to-date          From
                                                                                 During            July 1, 2004        Inception
                                                                                Development           Through            Through
                                                                                  Stage           June 30, 2005      June 30, 2004
                                                                                -------------     ---------------    --------------
<S>                                                                             <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                   $(9,119,219)        $(8,681,031)        $  (509,766)
     Adjustments to reconcile net loss to cash used
         in operations:
         Deferred tax benefit                                                    (1,948,147)         (1,722,414)           (225,733)
         Provision for valuation allowance                                        3,088,974           3,088,974                  --
         Provision for loss contingencies                                         2,049,610           2,049,610                  --
         Gain on sale of securities                                                 (23,198)            (23,198)                 --
         Depreciation                                                                 4,037               2,944               1,093
         Loss on abandonment of investment
             deposit and license agreement                                          120,000                  --             120,000
         Loss from discontinued operations                                        2,214,546           2,214,546                  --
         Expenses incurred in exchange for stock                                  1,164,649           1,105,249              59,400
         Increase in accounts payable and accrued liabilities                       375,270             370,038              76,810
                                                                                -----------         -----------         -----------

     NET CASH USED IN OPERATING ACTIVITIES                                      $(2,073,478)        $(1,595,282)        $  (478,196)

Cash Flows From Investing Activities:
     Payment of deposit on investment acquisitions                                 (189,950)            (17,700)           (172,250)
     Purchase of marketable securities                                              (50,476)            (50,476)                 --
     Proceeds from slae of marketable securities                                     73,674              73,674                  --
     Payment for discountinued operations                                          (550,000)           (500,000)            (50,000)
     Payment on construction in Rock Valley                                        (179,616)           (179,616)                 --
     Purchase of equipment and vehicles                                             (59,586)            (49,236)            (10,350)
                                                                                -----------         -----------         -----------

     NET CASH USED IN INVESTING ACTIVITIES                                      $  (955,954)        $  (723,354)        $  (232,600)

Cash Flows From Financing Activities:
     Proceeds from notes payable                                                    840,500             445,000             395,500
     Payments on notes payable                                                       (7,063)             (7,063)                 --
     Payments on notes payable of discontinued operations                          (470,844)           (470,844)                 --
     Proceeds received from shareholder advances                                     35,905              35,905                  --
     Repayments of shareholder advances                                             (35,905)            (35,905)                 --
     Proceeds from sale of common stock                                           2,693,100           2,352,500             340,600
                                                                                -----------         -----------         -----------
     NET CASH PROVIDED BY FINANCING ACTIVITIES                                  $ 3,055,693         $ 2,319,593         $   736,100

     NET INCREASE (DECREASE) IN CASH                                            $    26,261         $       957         $    25,304
                                                                                -----------         -----------         -----------
     Beginning Balance in Cash                                                  $        --         $    25,304         $        --
                                                                                -----------         -----------         -----------
                                                                                $    26,261         $    26,261         $    25,304
                                                                                ===========         ===========         ===========

                                                                                Cumulative          Year-to-date          From
                                                                                   Until            July 1, 2004       Inception
                                                                               Sep 30, 2004            Through          Through
                                                                              (from last 10Q)       June 30, 2005     June 30, 2004
                                                                            --------------------    -------------   --------------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
     Cash paid for interest and income taxes:
         Interest                                                               $    73,987         $    34,000         $    39,987

         Income taxes                                                           $        --         $        --         $        --

     Noncash transactions:
         Portion of sawmill asset purchase financed
             by seller                                                          $ 2,697,750         $ 2,697,750         $        --

         Issuance of stock for services                                         $ 1,115,249         $ 1,105,249         $    10,000

         Issuance of stock for debt                                             $   503,400         $   454,000         $    49,400

</TABLE>

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


                                      F-4


<PAGE>


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

                       Statement of Stockholders' Deficit
                            For the Periods Indicated

<TABLE>
<CAPTION>
                                                                                                        Deficit
                                                   $.001 Par Value                                    Accumulated
                                                     Common Stock       Common         Additional      During the
                                                        Number           Stock          Paid-In       Development
                                                      of Shares        Par Value        Capital          Stage            Total
                                                   ------------     ------------     ------------     ------------     ------------
<S>                                               <C>               <C>              <C>              <C>              <C>
Shares issued to officers and directors
   for consulting services in April 2001           $  1,470,404     $      1,470     $      2,530     $                $      4,000

Shares issued to co-founder
   for consulting services in April 2001                529,596              530              910                             1,440

Shares issued for the net assets of
   Clusone Acquisition Corp Dec. 2001                   500,000              500             (500)                                0

Net loss for the period ended
   December 31, 2001                                    (17,049)         (17,049)

Shares issued in merger with
   L1 Systems, Inc. in January 2002                   3,000,000            3,000                0                             3,000

Net loss for the period ended
   December 31, 2002                                    (28,882)         (28,882)

Shares issued for consulting
   services in March 2003                               179,000              179            3,401                             3,580

Net loss for the period ended
   December 31, 2003                                                                                       (22,462)         (22,462)
                                                   ------------     ------------     ------------     ------------     ------------
BALANCE, DECEMBER 31, 2003                         $  5,679,000     $      5,679     $      6,341     $    (68,393)    $    (56,373)

LYPP Net loss for the period ended
   June 30, 2004                                                                                            (3,185)          (3,185)
                                                   ------------     ------------     ------------     ------------     ------------
BALANCE, JUNE 30, 2004                             $  5,679,000     $      5,679     $      6,341     $    (71,578)    $    (59,558)

Shares issued in reverse merger with
   LYPP in September 2004                             5,758,091            5,758        2,153,185         (438,188)       1,720,755

Activity related to LYPP reverse merger
and  forward 2.2 to 1 stock split                     9,973,560            9,974           (9,974)                                0

Sales of stock                                        1,080,000            1,080          758,920                           760,000

Stock issued for services                             1,590,000            1,590          922,810                           924,400

Stock issued for conversion of
    Convertible Notes Payable                           454,000              454          490,402                           490,856

Net loss for the period from July 1, 2004
   through June 30, 2005                                                                                (8,681,031)      (8,681,031)
                                                   ------------     ------------     ------------     ------------     ------------

BALANCE, JUNE 30, 2005                             $ 24,534,651     $     24,535     $  4,321,684     $ (9,190,797)    $ (4,844,578)
                                                   ============     ============     ============     ============     ============
</TABLE>


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



                                      F-5


<PAGE>





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

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


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

NATURE OF BUSINESS

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

GOING CONCERN

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

As  shown  in the  financial  statements,  the  Company  incurred  a net loss of
$8,681,031  for  fiscal  year  ended June 30,  2005 and has  incurred  losses of
$438,187 for the past year. As June 30, 2005, current liabilities exceed current
assets by $5,097,435.  These factors raise substantial doubt about the Company's
ability to  continue  as a going  concern.  As  management  does not  anticipate
achieving  sufficient cash flows from operations by June 30, 2006, plans include
seeking additional capital through equity and debt financings.  No assurance can
be given that  additional  capital will be available when required or upon terms
acceptable to us. The  Company's  inability to generate  substantial  revenue or
obtain  additional  capital  through  equity  or debt  financings  would  have a
material  adverse  effect on their  financial  condition  and their  ability  to
continue operations.

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

                                       F-6
<PAGE>

REORGANIZATION

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

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

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

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

CONCENTRATIONS OF CREDIT RISK

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

CASH AND CASH EQUIVALENTS

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

PROPERTY AND EQUIPMENT

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

                                      F-7
<PAGE>

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

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

INCOME TAXES

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

RECENT ACCOUNTING PRONOUNCEMENTS:

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

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

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

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


                                      F-8
<PAGE>

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

SFAS  153 - In  December  2004,  the FASB  issued  SFAS No.  153  "Exchanges  of
Non-monetary Assets - an amendment of APB Opinion No. 29" ("SFAS 153"). SFAS 153
replaces the  exception  from fair value  measurement  in APB Opinion No. 29 for
non-monetary  exchanges of similar  productive  assets with a general  exception
from fair value  measurement  for exchanges of  non-monetary  assets that do not
have commercial  substance.  A non-monetary exchange has commercial substance if
the future cash flows of the entity are  expected to change  significantly  as a
result of the exchange.  SFAS 153 is effective for all interim periods beginning
after June 15, 2005.


USE OF ESTIMATES

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

INCOME (LOSS) PER SHARE

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



NOTE 2 - PROPERTY, PLANT & EQUIPMENT

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

                                                      06/30/2005      06/30/2004
                                                      ----------      ----------


Construction in process                               $ 179,616       $       0

Office furniture & equipment                             49,235           2,210
Vehicles                                                 10,350          10,350
                                                      ---------       ---------
                                                        239,201          12,560
    Less:  Accumulated depreciation                      (4,037)         (3,304)
                                                      ---------       ---------
      Total Property, Plant & Equipment               $ 235,164       $   9,256
                                                      =========       =========

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

                                      F-9

<PAGE>


NOTE 3 - NOTES PAYABLE

Notes  payables as of June 30, 2005 and June 30, 2004 consisted of the following
:


                                                      06/30/2005      06/30/2004
                                                      ----------      ----------
Convertible Notes Payable                             $ 20,000         $395,500
Northwest Iowa Planning and Development Commission      92,937               --
Brittany Capital Management Limited                    250,000               --
Stockholder Loan .                                      95,000               --
                                                      --------         --------
                                                      $457,937         $395,500
                                                      ========         ========


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

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

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

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


NOTE 4 - LIABILITIES RELATED TO DISCONTINUED OPERATIONS

On August 13,  2004,  the  Company  acquired  its  initial  operating  entity by
purchasing the assets of G&G/Cherokee  Wood,  Inc.("G&G"),  a sawmill located in
Blacksburg, South Carolina. The terms of the acquisition included a cash payment
of  $550,000  and an  unsecured  promissory  note


                                      F-10
<PAGE>

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


NOTE 5 - INCOME TAXES

Income tax benefit consists of the following:
                                                  07/01/2004-         Inception-
                                                   06/30/2005         06/30/2004
                                                 -----------         -----------
From Continuing Operations:
         Deferred benefit                        $ 1,733,974         $   225,733
         Valuation allowance                      (3,100,534)                  0
                                                 -----------         -----------
         Federal                                 $(1,366,600)        $   225,733
                                                 ===========         ===========
From Discontinued Operations:
         Deferred benefit                        $ 1,140,827         $         0
                                                 ===========         ===========


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

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

Deferred tax assets:
         Organizational costs                      $   225,733       $   225,733
         Net operating loss carryforward             2,874,801                 0
                                                   -----------       -----------
                                                   $ 3,100,534       $   225,733
Less:  Valuation allowance                          (3,100,534)                0
                                                   -----------       -----------
         Federal                                   $         0       $   225,733
                                                   ===========       ===========

NOTE  6 - COMMON STOCK ISSUED FOR SERVICES

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

On September 22, 2004, the Company entered into an employment agreement with its
chief  financial  officer  (see  note  7) and a  consulting  agreement  with  an
information  technology  consultant.  Under  the  terms of the  agreements,  the
Company issued 2251000 unregistered shares of Company's common stock. The shares
were valued at $40,568  based on estimated  fair market  value of the  Company's
common  stock at the time of grant.  The value of the  shares  was  recorded  as
compensation expense.

                                      F-11
<PAGE>


NOTE 7 - COMMITMENTS AND CONTINGENCIES


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

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

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

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

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

                                      F-12
<PAGE>

Brittany Capital  Management  Limited also entered into a note agreement whereby
Brittany  will  loan the  Company  up to  $250,000.  The note  carries a rate of
interest  of 8% per annum,  is  secured  by the pledge of 600,000  shares of our
common stock owned by our former  president and CEO, and was  originally  due on
September 27, 2005 and subsequently  extended until December 31, 2005. Under the
terms of the note,  at least 50% of the sales of common  stock under the Private
Equity Credit  Agreement with Brittany must be used to retire the note while the
note is  outstanding.  The terms of the Private  Equity  Credit  Agreement  also
prevent  us  from  entering  into  a  similar  financing  arrangement  with  any
third-party for the term of the Private Equity Credit Agreement,  which is three
years. We are also obliged to sell to Brittany at least $1 million of our common
stock under the Private Equity Credit Agreement.  The note is convertible at the
holder's  option for all or a portion of the  principal  amount of the note plus
accrued  interest  into shares of Common  Stock at a  conversion  price for each
share of Common  Stock equal to the Current  Market Price  multiplied  by eighty
percent (85%).  "Current Market Price" means the average of the three (3) lowest
closing bid prices for the Common Stock as reported by Bloomberg,  LP or, if not
so  reported,  as  reported  on the  over-the-counter  market,  for the ten (10)
trading  days  ending  on  the  trading  day  immediately  before  the  relevant
conversion  date.  The  note  accrues  interest  at a rate  of 8% per  year.  In
addition,  the Company  granted  Brittany a warrant to acquire 115,385 shares of
Common Stock. The Company also granted certain  registration  rights to Brittany
in connection with the shares into which the note may be converted as well as in
respect of shares that may be issued in respect of the  warrants.

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



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



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



NOTE 8 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

                                      F-13
<PAGE>

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

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

NOTE 9 - RESTATEMENT OF FINANCIAL STATEMENTS

The company has restated its 2005 financial statements to include the impairment
of assets and reserve for loss  contingencies as required by generally  accepted
accounting  principles.  After  the  original  issuance  of the  2005  financial
statements  on October 13,  2005,  the  Company  was able to provide  additional
accounting  records  and  supporting  documents  relating to  transaction.  This
additional   information   allowed  the  auditors  to  extend  their  procedures
sufficiently to determine the extent to which the financial  statements may have
been  affected  by the  inadequacy  of our system of  internal  controls.  These
procedures resulted in increasing current liabilities by $4,533,835,  increasing
stockholders'  deficit by $4,844,578  and  increasing the cumulative net loss by
$4,626,586.

                                      F-14