**SECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549****FORM 10-QSB**    (Mark one)    [ **X** ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities    Exchange Act of 1934**For the fiscal    quarter ended June 30, 2001**OR    [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange    Act of 1934    Commission file No. 0-13530***Littlefield    Corporation***    (Exact name of small business issuer as specified in its charter)**Delaware****74-2723809**    (State or other jurisdiction of incorporation or organization) (I.R.S. Employer    Identification No.)**2501 North Lamar    Blvd., Austin, Texas 78705**    (Address of principal executive offices)**(512) 476-5141**    (Issuer’s telephone number)    (Former name, address and fiscal year, if changed since last report)

Indicate by check    mark whether the issuer (1) has filed all reports required to be filed by    Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding    12 months (or for such shorter period that the issuer 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 August 10, 2001, the Issuer had 7,919,624 shares of its Common Stock,    par value $.001 per share, issued and outstanding.    Transitional Small Business Disclosure Format:    YES [ ] NO [ **X** ]

----

| **Part I. Financial      Information** |
|----------------------------------------|
| Item 1.                                | Financial Statements |  |
|                                        |  |  |
| a)                                     | Consolidated      Statements of Operations for the Three |  |
|                                        | Months Ended      June 30, 2001 and 2000 | **2** |
|                                        |  | **** |
| b)                                     | Consolidated      Statements of Operations for the Six | **** |
|                                        | Months Ended      June 30, 2001 and 2000 | **4** |
|                                        |  | **** |
| c)                                     | Consolidated      Balance Sheet as of June 30, 2001 | **6** |
|                                        |  | **** |
| d)                                     | Consolidated      Statements of Cash Flows for the Six | **** |
|                                        | Months Ended      June 30, 2001 and 2000 | **7** |
|                                        |  | **** |
| e)                                     | Notes to Consolidated      Financial Statements | **9** |
|                                        |  | **** |
| Item 2.                                | Management’s      Discussion and Analysis of Financial Condition | **** |
|                                        | And Results of      Operations | **16** |
|                                        |  | **** |
| **Part II. Other Information**         |
|                                        | Item 1. Legal      Proceedings | **17** |
|                                        |  | **** |
|                                        | Item 6. Exhibits      and Reports on Form 8-K | **17** |
|                                        |  | **** |
|                                        | Signatures | **18** |

----

| **Three Months      Ended June 30,**                                          | **2001**      | **2000**      |
|-------------------------------------------------------------------------------|---------------|---------------|
|                                                                               |               |               |
| **REVENUES:**                                                                 |               |               |
| Entertainment                                                                 | $1,534,440    | $1,311,157    |
| Amusements                                                                    | 421,625       | 1,401,772     |
| Hospitality                                                                   | 207,935       | 0             |
| Other                                                                         | 222,678       | 287,921       |
| **TOTAL REVENUES**                                                            | **2,386,678** | **3,000,850** |
|                                                                               |               |               |
| **DIRECT COSTS      AND EXPENSES:**                                           |               |               |
| Direct salaries      and other compensation                                   | 391,911       | 222,401       |
| Rent and utilities                                                            | 420,200       | 569,398       |
| Other direct      operating costs                                             | 593,693       | 366,143       |
| Depreciation      and amortization                                            | 391,275       | 521,902       |
| License expense                                                               | 23,004        | 375,633       |
| **TOTAL DIRECT      COSTS AND EXPENSES**                                      | **1,820,083** | **2,055,477** |
| ****                                                                          | ****          | ****          |
| **GROSS MARGIN**                                                              | **566,595**   | **945,373**   |
|                                                                               |               |               |
| **GENERAL AND      ADMINISTRATIVE EXPENSES:**                                 |               |               |
| Salaries and      other compensation                                          | 134,509       | 258,651       |
| Legal and accounting      fees                                                | 38,664        | 67,672        |
| Depreciation      and amortization                                            | 13,856        | 13,831        |
| Other general      and administrative ($18,000 and $9,000 to related parties) | 150,234       | 104,518       |
| Unusual and nonrecurring      items:                                          |               |               |
| Relocation and      moving expenses                                           | 1,229         | 0             |
| **TOTAL GENERAL      AND ADMINISTRATIVE EXPENSES**                            | **338,492**   | **444,672**   |
| ****                                                                          | ****          | ****          |
| **OPERATING      INCOME**                                                     | **228,103**   | **500,701**   |
| ****                                                                          |               |               |
| **OTHER INCOME      AND EXPENSES:**                                           |               |               |
| Interest and      investment income                                           | 66,693        | 56,177        |
| Interest expense      ($2,245 and $4,152, respectively to related parties)    | (18,494)      | (31,677)      |
| Gain on fixed      asset sales                                                | 1,112         | 0             |
| Legal settlement      income-net of legal expenses                            | 74,165        | 0             |
| **TOTAL OTHER      INCOME AND EXPENSES**                                      | **123,476**   | **24,500**    |
| ****                                                                          | ****          | ****          |
| **NET INCOME      BEFORE PROVISION FOR INCOME TAXES**                         | **351,579**   | **525,201**   |
| ****                                                                          | ****          | ****          |
| **PROVISION      FOR INCOME TAXES**                                           | **18,023**    | **18,037**    |
| ****                                                                          | ****          | ****          |
| **NET INCOME**                                                                | **333,556**   | **507,164**   |
| ****                                                                          | ****          | ****          |
| **OTHER COMPREHENSIVE      INCOME**                                           | **27,555**    | **45,798**    |
| ****                                                                          | ****          | ****          |
| **NET COMPREHENSIVE      INCOME**                                             | **$361,111**  | **$552,962**  |

----

| **Three Months Ended June      30,**                     | **2001**  | **2000**  |
|----------------------------------------------------------|-----------|-----------|
| EARNINGS PER      SHARE:                                 |           |           |
| Basic earnings      per share                            | $.04      | $.06      |
|                                                          |           |           |
| Diluted earnings      per share                          | $.04      | $.06      |
|                                                          |           |           |
| Weighted average      shares outstanding – basic   | 7,942,481 | 8,096,820 |
|                                                          |           |           |
| Weighted average      shares outstanding – diluted | 7,942,481 | 8,096,820 |

----

| **Six Months      Ended June 30,**                                                            | **2001**       | **2000**       |
|-----------------------------------------------------------------------------------------------|----------------|----------------|
|                                                                                               |                |                |
| **REVENUES:**                                                                                 |                |                |
| Entertainment                                                                                 | $3,280,920     | $2,669,382     |
| Amusements                                                                                    | 724,680        | 3,248,625      |
| Hospitality                                                                                   | 308,448        | 0              |
| Other                                                                                         | 324,404        | 432,301        |
| **TOTAL REVENUES**                                                                            | **4,638,452**  | **6,350,308**  |
|                                                                                               |                |                |
| **DIRECT COSTS      AND EXPENSES:**                                                           |                |                |
| Direct salaries      and other compensation                                                   | 694,557        | 456,191        |
| Rent and utilities                                                                            | 775,965        | 1,006,333      |
| Other direct      operating costs                                                             | 1,094,836      | 713,956        |
| Depreciation      and amortization                                                            | 793,879        | 1,041,631      |
| License expense                                                                               | 34,513         | 783,288        |
| **TOTAL DIRECT      COSTS AND EXPENSES:**                                                     | **3,393,750**  | **4,001,399**  |
|                                                                                               |                |                |
| **GROSS MARGIN**                                                                              | **1,244,702**  | **2,348,909**  |
| ****                                                                                          | ****           | ****           |
| **GENERAL AND      ADMINISTRATIVE EXPENSES**                                                  | ****           | ****           |
| Salaries and      other compensation                                                          | 274,935        | 283,523        |
| Legal and accounting      fees                                                                | 68,658         | 119,583        |
| Depreciation      and amortization                                                            | 27,410         | 33,050         |
| Other general      and administrative ($36,000 and $18,000 to related parties)                | 269,820        | 332,310        |
| Unusual and nonrecurring      items:                                                          |                |                |
| Relocation and      moving expenses                                                           | 1,557          | 0              |
| **TOTAL GENERAL      AND ADMINISTRATIVE EXPENSES**                                            | **642,380**    | **768,466**    |
| ****                                                                                          | ****           | ****           |
| **OPERATING      INCOME**                                                                     | **602,322**    | **1,580,443**  |
| ****                                                                                          | ****           | ****           |
| **OTHER INCOME      AND EXPENSES:**                                                           | ****           | ****           |
| Interest and      investment income                                                           | 125,805        | 97,440         |
| Interest expense      ($5,024 and $9,130 respectively to related parties)                     | (42,702)       | (68,336)       |
| Gain on fixed      asset sales                                                                | 250,862        | 0              |
| Legal settlements                                                                             | 74,165         | 0              |
| **TOTAL OTHER      INCOME AND EXPENSES**                                                      | **408,130**    | **29,104**     |
| ****                                                                                          | ****           | ****           |
| **NET INCOME      BEFORE PROVISION FOR INCOME TAXES**                                         | **1,010,452**  | **1,609,547**  |
| ****                                                                                          | ****           | ****           |
| **PROVISION      FOR INCOME TAXES**                                                           | **50,561**     | **27,461**     |
| ****                                                                                          | ****           | ****           |
| **NET INCOME      BEFORE EXTRAORDINARY GAIN**                                                 | **959,891**    | **1,582,086**  |
|                                                                                          |           |           |
| Extra-ordinary      gain on settlement with equipment lessors, net of income taxes of $10,771 | 204,639        | 0              |
|                                                                                          |           |           |
| **NET INCOME**                                                                                | **1,164,530**  | **1,582,086**  |
| ****                                                                                          | ****           | ****           |
| **OTHER COMPREHENSIVE      INCOME**                                                           | **127,827**    | **37,774**     |
| ****                                                                                          | ****           | ****           |
| **NET COMPREHENSIVE      INCOME**                                                             | **$1,292,357** | **$1,619,860** |

----

| **Six Months      Ended June 30,**                                   | **2001**  | **2000**  |
|----------------------------------------------------------------------|-----------|-----------|
|                                                                 |      |      |
| **EARNINGS PER      SHARE:**                                         |           |           |
| Basic earnings      per share before extraordinary gain              | $ .13     | $ .18     |
| Basic extraordinary      gain on settlement with equipment lessors   | .02       | ---       |
| Basic earnings      per share                                        | $.15      | $.18      |
|                                                                 |      |      |
| Diluted earnings      per share before extraordinary gain            | $.13      | $.18      |
| Diluted extraordinary      gain on settlement with equipment lessors | .02       | ---       |
| Diluted earnings      per share                                      | $.15      | $.18      |
|                                                                      |           |           |
| Weighted average      shares outstanding – basic               | 7,971,277 | 8,616,897 |
|                                                                      |           |           |
| Weighted average      shares outstanding - diluted                   | 7,971,277 | 8,616,897 |

----

##### **ASSETS**

| **Current Assets:**                                                                                                             | **June 30, 2001** |
|---------------------------------------------------------------------------------------------------------------------------------|-------------------|
|                                                                                                                            |              |
| Cash and cash      equivalents                                                                                                  | $1,834,120        |
| Accounts receivable,      net of allowance for doubtful accounts of $-0-                                                        | 372,620           |
| Equity Securities,      available for sale                                                                                      | 758,743           |
| Other prepaid      expenses                                                                                                     | 188,426           |
| Total Current      Assets                                                                                                       | 3,153,909         |
|                                                                                                                                 |                   |
| Property and      Equipment – at cost, net of accumulated depreciation and amortization                                   | 5,652,089         |
|                                                                                                                                 |                   |
| **Other Assets:**                                                                                                               |                   |
| Notes receivable                                                                                                                | 963,603           |
| Intangible assets,      net                                                                                                     | 3,182,291         |
| Other non-current      assets                                                                                                   | 488,088           |
| Total Other Assets                                                                                                              | 4,633,982         |
|                                                                                                                                 |                   |
| **TOTAL ASSETS**                                                                                                                | **$13,439,980**   |
|                                                                                                                                 |                   |
| **LIABILITIES AND STOCKHOLDERS' EQUITY**                                                                                        |
|                                                                                                                                 |                   |
| **Current Liabilities:**                                                                                                        |                   |
| Notes payable      – current portion ($94,187 to related parties)                                                         | $342,032          |
| Capital leases      payable – current portion                                                                             | 135,163           |
| Trade accounts      payable                                                                                                     | 172,567           |
| Accrued expenses      and other current liabilities                                                                             | 2,097,270         |
| Total Current      Liabilities                                                                                                  | 2,747,032         |
|                                                                                                                                 |                   |
| **Long-term      Liabilities:**                                                                                                 |                   |
| Notes payable,      net of current portion                                                                                      | 974,229           |
| Total Long-term      Liabilities                                                                                                | 974,229           |
|                                                                                                                                 |                   |
| **Stockholders'      Equity:**                                                                                                  |                   |
| Common stock,      $.001 par value, (authorized 20,000,000 shares, issued 10,177,290 shares,      outstanding 7,919,624 shares) | 10,177            |
| Additional paid-in-capital                                                                                                      | 23,715,699        |
| Treasury stock      – 2,257,666 shares, at cost                                                                           | (2,868,383)       |
| Accumulated Comprehensive      Income                                                                                           | 139,481           |
| Accumulated deficit                                                                                                             | (11,278,255)      |
| Total Stockholders'      Equity                                                                                                 | 9,718,719         |
|                                                                                                                                 |                   |
| **TOTAL LIABILITIES      AND STOCKHOLDERS' EQUITY**                                                                             | **$13,439,980**   |

----

| **Six months      Ended June 30,**                                                                                      | **2001**    | **2000**    |
|-------------------------------------------------------------------------------------------------------------------------|-------------|-------------|
|                                                                                                                         |             |             |
| CASH FLOWS FROM      OPERATING ACTIVITIES:                                                                              |             |             |
| Net income                                                                                                              | $1,164,530  | $1,582,086  |
| Adjustments to      reconcile net income to net cash provided by operating   activities:                      |             |             |
| Depreciation      and amortization                                                                                      | 821,289     | 1,074,681   |
| Extra-ordinary      debt restructuring                                                                                  | (204,639)   | 0           |
| Gain on sales      of fixed assets                                                                                      | (250,862)   | 0           |
| Increase (decrease)      in cash flows as a result of changes in asset and liability   account      balances: |             |             |
| Accounts receivable                                                                                                     | (31,078)    | 124,751     |
| Other assets      and licenses                                                                                          | (263,339)   | 659,827     |
| Trade accounts      payable                                                                                             | (47,640)    | 82,990      |
| Accrued expenses      and other current liabilities                                                                     | (115,154)   | (388,066)   |
| NET CASH PROVIDED      BY OPERATING ACTIVITIES                                                                          | 1,073,107   | 3,136,269   |
|                                                                                                                         |             |             |
| CASH FLOWS FROM      INVESTING ACTIVITIES:                                                                              |             |             |
| Purchase of equity      securities                                                                                      | 0      | (512,856)   |
| Property and      equipment expenditures                                                                                | (1,902,195) | (262,251)   |
| Collections of      notes receivable                                                                                    | 8,240       | 39,946      |
| Issuance of notes      receivable                                                                                       | (861,211)   | 0           |
| Purchase of goodwill      and intangibles                                                                               | (85,287)    | (75,000)    |
| Refund of goodwill      and intangible purchases                                                                        | 17,323      | 0           |
| Proceeds from      sale of property and equipment                                                                       | 468,381     | 0           |
| NET CASH USED      IN INVESTING ACTIVITIES                                                                              | (2,354,749) | (810,161)   |
|                                                                                                                         |             |             |
| CASH FLOWS FROM      FINANCING ACTIVITIES:                                                                              |             |             |
| Payments on capital      lease obligations                                                                              | 0           | (48,000)    |
| Payments on notes      payable                                                                                          | (211,035)   | (140,641)   |
| Purchase of treasury      stock                                                                                         | (177,575)   | (1,938,360) |
| Proceeds from      issuance of notes payable                                                                            | 0           | 0           |
| NET CASH PROVIDED      (USED) IN FINANCING ACTIVITIES                                                                   | (388,610)   | (2,127,001) |
|                                                                                                                         |             |             |
| NET INCREASE      (DECREASE) IN CASH                                                                                    | (1,670,252) | 199,107     |
|                                                                                                                         |             |             |
| CASH AT BEGINNING      OF PERIOD                                                                                        | 3,504,372   | 3,864,943   |
|                                                                                                                         |             |             |
| CASH AT END OF      PERIOD                                                                                              | $1,834,120  | $4,064,050  |

*See notes to consolidated  financial statements.*

----

| **Six months      Ended June 30,**                                       | **2001**   | **2000** |
|--------------------------------------------------------------------------|------------|----------|
|                                                                          |            |          |
| **SUPPLEMENTAL      DISCLOSURES OF CASH FLOW INFORMATION:**              |            |          |
|                                                                          |            |          |
| **Cash payments:**                                                       |            |          |
|                                                                          |            |          |
| Interest                                                                 | $27,993    | $9,130   |
|                                                                          |            |          |
| Income taxes                                                             | $22,211    | $27,460  |
|                                                                          |            |          |
| Non-cash transactions:                                                   |            |          |
|                                                                          |            |          |
| Acquisition of      property and equipment in exchange for notes payable | $1,073,801 | $0       |

----

***Littlefield    Corporation*****NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)****June 30, 2001**

**NOTE 1 – PRINCIPLES    OF CONSOLIDATION AND BASIS OF PRESENTATION.**    The unaudited consolidated financial statements include the accounts of Littlefield    Corporation and its wholly owned subsidiaries (the “Company”).    The financial statements contained herein are unaudited and, in the opinion    of management, contain all adjustments necessary for a fair presentation of    financial position, results of operations and cash flows for the periods presented.    The Company’s accounting policies and certain other disclosures are    set forth in the notes to the consolidated financial statements contained    in the Company’s Annual Report on Form 10-KSB for the fiscal year ended    December 31, 2000. The financial statements contained herein should be read    in conjunction with the notes to the Company’s audited consolidated    financial statements included in the Annual Report on Form 10-KSB for the    fiscal year ended December 31, 2000. The preparation of the condensed consolidated    financial statements in conformity with generally accepted accounting principles    requires management to make estimates and assumptions that affect the reported    amount of assets and liabilities, disclosure of contingent assets and liabilities    and the reported amount of revenue and expenses during the reported period.    Actual results could differ from these estimates. Where appropriate, items    within the consolidated condensed financial statements have been reclassified    to maintain consistency and comparability for all periods presented.    The operating results for the three-month and six-month periods ended June    30, 2001 are not necessarily indicative of the results that may be expected    for the fiscal year ending December 31, 2001. Except for historical information    contained herein, certain matters set forth in this report are forward looking    statements that are subject to substantial risks and uncertainties, including    the impact of government regulation and taxation, customer attendance and    spending, competition, and general economic conditions, among others. This    Quarterly Report on Form 10-QSB contains “forward-looking” statements    as such term is defined in the Private Securities Litigation Reform Act of    1995 and information relating to the Company and its subsidiaries that are    based on the beliefs of the Company’s management. When used in this    report, the words “anticipate,” believe,” “estimate,”    “expect,” and “intend” and words or phrases of similar    import, as they relate to the company or its subsidiaries or Company management,    are intended to identify forward-looking statements. Such statements reflect    the current risks, uncertainties and assumptions related to certain factors    including, without limitations, competitive factors, general economic conditions,    customer relations, relationships with vendors, the interest rate environment,    governmental regulation and supervision, seasonality, distribution networks,    product introductions and acceptance, technological change, changes in industry    practices, onetime events and other factors described herein and in other    filings made by the company with the Securities and Exchange Commission, based    upon changing conditions, should any one or more of these risks or uncertainties    materialize, or should any underlying assumptions prove incorrect, actual    results may vary materially from those described herein as anticipated, believed,    estimated, expected or intended. The company does not intend to update these    forward-looking statements.

----

| Land                                                 | $567,613      |
|------------------------------------------------------|---------------|
| Buildings                                            | 1,392,201     |
| Building and      leasehold improvements             | 3,427,134     |
| Amusement machines      and bingo equipment          | 1,849,469     |
| Equipment, furniture      and fixtures               | 1,460,427     |
| Automobiles                                          | 313,746       |
|                                                      | **9,010,590** |
|                                                      |               |
| Less: Accumulated      depreciation and amortization | (3,358,501)   |
|                                                      |               |
| Property and      equipment, net                     | $5,652,089    |

| Goodwill                            | $5,335,361  |
|-------------------------------------|-------------|
| Bingo licenses                      | 289,720     |
| Covenants not      to compete       | 385,000     |
|                                     | 6,010,081   |
|                                     |             |
| Less: Accumulated      amortization | (2,827,790) |
|                                     |             |
| Intangible assets,      net         | $3,182,291  |

----

| **Six months      ended June 30,**                | **2001**   | **2001**   | **2000**   | **2000**   |
|---------------------------------------------------|------------|------------|------------|------------|
|                                                   | Basic      | Diluted    | Basic      | Diluted    |
| Numerator:                                        |            |            |            |            |
| Net income before      extra-ordinary gain        | $959,891   | $959,891   | $1,582,086 | $1,582,086 |
| Extra-ordinary      gain                          | 204,639    | 204,639    | ---        | ---        |
| Income available      to common stockholders      | $1,164,530 | $1,164,530 | $1,582,086 | $1,582,086 |
|                                                   |            |            |            |            |
| Denominator:                                      |            |            |            |            |
| Weighted average      shares outstanding          | 7,971,277  | 7,971,277  | 8,616,897  | 8,616,897  |
| Effect of dilutive      securities:               |            |            |            |            |
| Stock options      and warrants                   | ---        | ---        | ---        | ---        |
| Weighted average      shares outstanding          | 7,971,277  | 7,971,277  | 8,616,897  | 8,616,897  |
|                                                   |            |            |            |            |
| Earnings per      share before extraordinary item | $ .13      | $ .13      | $ .18      | $ .18      |
| Extraordinary      gain on settlement             | .02        | .02        | ---        | ---        |
| Earnings per      share                           | $.15       | $.15       | $.18       | $.18       |

|                                                             | **2001**   | **2000**   |
|-------------------------------------------------------------|------------|------------|
| Net income                                                  | $1,164,530 | $1,582,086 |
|                                                             |            |            |
| Other comprehensive      income                             |            |            |
| Net unrealized      gain       on investments held for sale | 127,827    | 37,774     |
|                                                             |            |            |
| Total comprehensive      income                             | $1,292,357 | $1,619,860 |

----

**NOTE 8 - RELATED PARTY TRANSACTIONS.**  Promissory notes receivable from related parties totaled $0 and $52,000, respectively,  for the six months ended June 30, 2001 and 2000. Interest income related to  these notes recorded by the Company was $0 and $1,227 for the six months ended  June 30, 2001 and 2000, respectively.   In March 1998, the Company acquired Ambler Bingo. In conjunction with this purchase,  the Company issued a promissory note payable in the amount of $400,000 to the  seller (a related party), as partial consideration for this purchase. This note  payable is due in monthly installments of $9,765, with an interest rate of 8.0%  and a maturity date of May 2002. For the six months ended June 30, 2001 and  2000, the Company recognized $5,024 and $9,130, respectively, of interest expense  related to this obligation.  In June 2001, the Company entered into a warehouse lease agreement for 6,000  sq. ft. of storage space with Flournoy Management Inc. Flournoy Management Inc.’s  majority shareholders are Gene and Scott Flournoy who are employed by the Company  as Regional Managers in Alabama. The lease has a two-year term and the rate  is $1,729 per month. The warehouse is being used to store amusement machines  that the Company was forced to move out of South Carolina, as discussed in earlier  reports, and as a technical center to deploy amusement machines in other jurisdictions.  The Company sub-leased office space for its corporate headquarters in Austin,  Texas from a major shareholder, director and officer of the company. The amount  paid for the first six months ended June 30, 2001 and 2000 was approximately  $36,000 and $18,000 respectively. This sub-lease ended with the purchase of  a new corporate headquarters building on June 28, 2001.

**NOTE 9 – COMMITMENTS AND  CONTINGENCIES.**  Generally speaking, the Securities and Exchange Commission guidelines require  a company to report any pending legal and/or regulatory proceedings that involves  a claim for damages in excess of ten percent (10%) of its current assets. The  litigation and proceedings discussed below do not necessarily meet this threshold,  but are included in the interest of full disclosure. In general, the Company  will vigorously defend itself against all claims to the fullest extent possible:*Pondella Hall for Hire, Inc., d/b/a Eight Hundred v. American Bingo and Gaming,  Case No.: 97-2750, Circuit Court of the Twelfth Judicial Circuit in and for  Manatee County, Florida*. In July of 1995 the Company bought three Florida  bingo centers from Phillip Furtney and two corporations related to Mr. Furtney  (which corporations and Mr. Furtney are referred to collectively as “Furtney”).  On June 12, 1997, Furtney filed a lawsuit against the Company in Florida, alleging  breach of contract. Furtney alleged that the Company defaulted on its original  purchase note and stock obligations under the purchase agreements. On July 12,  1997, the Company answered this lawsuit and filed a counterclaim against Furtney  alleging, among other things, fraud, negligent misrepresentation, breach of  express warranties, contractual indemnity and tortious interference with contractual  rights. The Company believes that it was materially defrauded in its purchase  of these three Florida bingo centers from Furtney in that Furtney made no disclosure  to the Company of an ongoing criminal investigation of the operation of these  bingo centers by the Florida State Attorney General's Office, and that Furtney  was fully aware of this investigation. The state of Florida temporarily closed  these three bingo centers, as well as several other centers formerly owned by  Mr. Furtney, in November 1995. The Company sold these three bingo centers in  December of 1995. In January of 1997, the Company and the State of Florida settled  all matters regarding the Company's previous ownership and operation of these  bingo centers. The Company believes that Furtney's lawsuit against the Company  is completely without merit and that the Company will prevail in its counterclaim.  There can be no assurance of this result and a decision against the Company  could have a material adverse effect on the financial position and operations  of the Company.

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| **June 30,      2001**             |                   |                |                 |                |                  |
|------------------------------------|-------------------|----------------|-----------------|----------------|------------------|
|                                    | **Entertainment** | **Amusements** | **Hospitality** | **Adjustment** | **Consolidated** |
| Revenue                            | $3,612,040        | $724,405       | $308,448        | $(6,441)       | $4,638,452       |
| Depreciation      and Amortization | 544,241           | 191,490        | 58,149          | 27,409         | 821,289          |
| Segment profit                     | 1,340,234         | 105,401        | (203,013)       | (78,092)       | 1,164,530        |
| Segment Assets                     | 14,622,199        | 4,711,841      | 667,697         | (6,561,757)    | 13,439,980       |
|                                    |                   |                |                 |                |                  |
| **June 30, 2000**                  |                   |                |                 |                |                  |
|                                    | **Entertainment** | **Amusements** | **Hospitality** | **Adjustment** | **Consolidated** |
| Revenue                            | $2,669,382        | $3,248,625     | $0              | $432,301       | 6,350,308        |
| Depreciation      and Amortization | 659,671           | 381,961        | 0               | 33,049         | 1,074,681        |
| Segment profit                     | 526,326           | 1,637,534      | 0               | (581,774)      | 1,582,086        |
| Segment Assets                     | 14,846,861        | 2,299,899      | 0               | (4,136,710)    | 13,010,050       |

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**NOTE 11 – ACQUISITIONS, OPENINGS, CLOSINGS AND REORGANIZATIONS.**  The Company opened a new bingo hall in Montgomery, Alabama on June 2, 2001.  The bingo hall also included a video arcade with approximately 100 machines.    The Company signed a letter of intent to purchase a party rental company in  Austin, Texas. This acquisition was finalized on July 18, 2001.  The Company signed a letter of intent to purchase a catering company in Austin,  Texas. This acquisition is expected to be finalized in the third quarter 2001.  The Company has entered into a contract to purchase the real estate property  where Ambler Bingo is currently being operated. This is expected to close in  the third quarter of 2001.  The Company has entered into a lease for a start up bingo hall in McAllen, Texas  and will begin the lease in October 2001. The Company also entered into a lease  for an existing bingo hall in Amarillo, Texas and will begin operations in the  third quarter 2001.  The Company purchased an existing office building in Austin, Texas on June 28,  2001 and has moved its corporate offices into the facility. Part of the building  is currently being leased to a third party, which will terminate October 31,  2001. The Company plans to remodel the building and locate the sales and marketing  departments of the hospitality division in the vacated lease space.  The Company will close several video arcades in Alabama at the end of July 2001,  as they were deemed illegal by the local counties’ sheriffs in three separate  counties. The Company will continue to operate all arcades in Montgomery (two  at the Company’s bingo halls and one split location). All of the machines  at the closed locations will be moved into the Company’s warehouse in  Shorter, Alabama and will be sold.

**NOTE 12 - SUBSEQUENT EVENTS.*****None***

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| ExhibitNumber | Description                                      | SequentialPage Number |
|---------------|--------------------------------------------------|-----------------------|
| 27.1          | Financial Data      Schedule (for SEC use only). |                       |

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