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, 2006

                                       OR

[  ]   Transition Report Pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934

Commission file No. 0-24805
                    -------

                             Littlefield Corporation
                             -----------------------
        (Exact name of small business issuer as specified in its charter)

              Delaware                                      74-2723809
              --------                                      ----------
  (State or other jurisdiction of                        (I.R.S. Employer
   incorporation or organization)                       Identification No.)


                     2501 North Lamar Blvd., Austin TX 78705
                     ---------------------------------------
                    (Address of principal executive offices)


                                 (512) 476-5141
                                 --------------
                           (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 during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.
YES [ X ]         NO  [  ]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
YES [  ]          NO [ X ]

As of June 30, 2006, the Issuer had 10,833,334  shares of its Common Stock,  par
value $.001 per share outstanding.

Transitional Small Business Disclosure Format: YES  [  ]  NO  [ X ]


<PAGE>


                             Littlefield Corporation

                                   FORM 10-QSB

                       For the quarter ended June 30, 2006

                                      INDEX



Part I.  Financial Information

               Item 1.  Financial Statements

                     a) Consolidated Statements of Operations for the Three
                        Months Ended June 30, 2006 and 2005.................   2

                     b) Consolidated Statements of Operations for the Six
                        Months Ended June 30, 2006 and 2005.................   4

                     c) Consolidated Balance Sheet as of June 30, 2006......   6

                     d) Consolidated Statements of Cash Flows for the Six
                        Months Ended June 30, 2006 and 2005.................   7

                     e) Notes to Consolidated Financial Statements..........   9

               Item 2.  Management's Discussion and Analysis of Financial
                        Condition And Results of Operations.................  19

               Item 3.  Controls and Procedures.............................  21

Part II. Other Information

               Item 1.  Legal Proceedings...................................  21

               Item 6.  Exhibits............................................  21

Signatures..................................................................  22

                                       1
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

<TABLE>
<CAPTION>
                             Littlefield Corporation
                CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three Months Ended June 30,                                                     2006              2005
                                                                                ----              ----
                                                                                               (Restated)
                                                                                               ----------
REVENUES:
<S>                                                                         <C>               <C>
   Entertainment                                                            $1,996,000        $1,692,090
   Hospitality                                                               1,622,035         1,301,113
   Other                                                                        (3,186)            4,316
                                                                          -------------     -------------
TOTAL REVENUES                                                               3,614,849         2,997,519
                                                                          -------------     -------------

DIRECT COSTS AND EXPENSES:
   Direct salaries and other compensation                                      758,204           705,976
   Rent and utilities                                                          626,303           582,617
   Other direct operating costs                                                953,494           771,707
   Depreciation and amortization                                               165,975           231,099
   License expense                                                              30,664            16,307
   Provision for doubtful accounts                                                   0           129,597
                                                                          -------------     -------------
TOTAL COSTS AND EXPENSES                                                     2,534,640         2,437,303

                                                                          -------------     -------------
GROSS MARGIN                                                                 1,080,209           560,216

GENERAL AND ADMINISTRATIVE EXPENSES
   Salaries and other compensation                                             142,596           122,622
   Legal and accounting fees                                                    62,932           422,611
   Depreciation and amortization                                                26,247            23,160
   Compensation expense related to options                                      56,400            47,000
   Other general and administrative                                            128,454           111,877
                                                                          -------------     -------------
   TOTAL GENERAL AND ADMINISTRATIVE EXPENSES                                   416,629           727,270

                                                                          -------------     -------------
OPERATING INCOME                                                               663,580          (167,054)

OTHER INCOME AND EXPENSES:
   Interest and investment income                                               11,516             4,385
   Interest expense ($7,875 and $10,315 respectively to related parties)       (51,506)          (76,283)
   Gain (loss) on fixed asset sales                                              4,000            (4,479)
   Gain (loss) on sale of investments                                                              9,312
   Gain settlement                                                                   0           667,793
   Other income and (expense)                                                      125               625
                                                                          -------------     -------------
TOTAL OTHER INCOME AND EXPENSES                                                (35,865)          601,353

                                                                          -------------     -------------
NET INCOME BEFORE PROVISION FOR INCOME TAXES                                   627,715           434,299

PROVISION FOR INCOME TAXES                                                      15,774             6,840
                                                                          -------------     -------------

NET INCOME                                                                     611,941           427,459

OTHER COMPREHENSIVE INCOME                                                           0               (34)
                                                                          -------------     -------------

NET COMPREHENSIVE INCOME                                                       611,941           427,425

                                                                          =============     =============
</TABLE>

                 See notes to consolidated financial statements.

                                       2
<PAGE>


<TABLE>
<CAPTION>
                             Littlefield Corporation
                CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


Three Months Ended June 30,                                                     2006              2005
                                                                                ----              ----
                                                                                               (Restated)
                                                                                               ----------
EARNINGS (LOSS) PER SHARE:
<S>                                                                              <C>               <C>
   Basic earnings (loss) per share                                               $.057             $.041
                                                                          -------------     -------------

                                                                          -------------     -------------
   Diluted earnings (loss) per share                                             $.055             $.041
                                                                          =============     =============

Weighted average shares outstanding - basic                                 10,756,967        10,333,151

Weighted average shares outstanding - diluted                               11,048,517        10,413,769
</TABLE>





                 See notes to consolidated financial statements.

                                       3
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

<TABLE>
<CAPTION>
                             Littlefield Corporation
                CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Six Months Ended June 30,                                                       2006              2005
                                                                                ----              ----
                                                                                               (Restated)
                                                                                               ----------
REVENUES:
<S>                                                                         <C>               <C>
   Entertainment                                                            $4,168,319        $3,491,787
   Hospitality                                                               2,322,883         1,938,427
   Other                                                                        42,884            57,021
                                                                          -------------     -------------
TOTAL REVENUES                                                               6,534,086         5,487,235
                                                                          -------------     -------------

DIRECT COSTS AND EXPENSES:
   Direct salaries and other compensation                                    1,326,722         1,235,396
   Rent and utilities                                                        1,240,122         1,081,971
   Other direct operating costs                                              1,611,936         1,440,099
   Depreciation and amortization                                               329,592           443,565
   License expense                                                              70,890            26,822
   Provision for doubtful accounts                                                   0           134,797
                                                                          -------------     -------------
TOTAL COSTS AND EXPENSES                                                     4,579,262         4,362,650

                                                                          -------------     -------------
GROSS MARGIN                                                                 1,954,824         1,124,585

GENERAL AND ADMINISTRATIVE EXPENSES
   Salaries and other compensation                                             290,450           266,405
   Legal and accounting fees                                                    78,311           540,077
   Depreciation and amortization                                                50,643            46,857
   Compensation expense related to options                                      81,358            66,750
   Other general and administrative                                            239,657           210,899
                                                                          -------------     -------------
   TOTAL GENERAL AND ADMINISTRATIVE EXPENSES                                   740,419         1,130,988

                                                                          -------------     -------------
OPERATING INCOME                                                             1,214,405            (6,403)

OTHER INCOME AND EXPENSES:
   Interest and investment income                                               43,968             5,374
   Interest expense ($15,753 and $23,815 respectively to related parties)     (108,365)         (134,255)
   Gain (loss) on fixed asset sales                                              4,346            (4,479)
   Gain (loss) on sale of investments                                                              9,312
   Gain on Settlement                                                                            687,293
   Other income and (expense)                                                   37,527                 0
                                                                          -------------     -------------
TOTAL OTHER INCOME AND EXPENSES                                                (22,524)          563,245

                                                                          -------------     -------------
NET INCOME BEFORE PROVISION FOR INCOME TAXES                                 1,191,881           556,842

PROVISION FOR INCOME TAXES                                                      30,774            21,840
                                                                          -------------     -------------

NET INCOME                                                                   1,161,107           535,002

OTHER COMPREHENSIVE INCOME                                                           0               759
                                                                          -------------     -------------

NET COMPREHENSIVE INCOME                                                    $1,161,107          $535,761
                                                                          =============     =============
</TABLE>

                 See notes to consolidated financial statements.

                                       4
<PAGE>


<TABLE>
<CAPTION>
                             Littlefield Corporation
                CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


Six Months Ended June 30,                                                       2006              2005
                                                                                ----              ----
                                                                                               (Restated)
                                                                                               ----------

EARNINGS (LOSS) PER SHARE:
<S>                                                                              <C>               <C>
   Basic earnings (loss) per share                                               $.109             $.052
                                                                          -------------     -------------

                                                                          -------------     -------------
   Diluted earnings (loss) per share                                             $.107             $.052
                                                                          =============     =============

Weighted average shares outstanding - basic                                 10,626,668        10,263,810

Weighted average shares outstanding - diluted                               10,843,946        10,353,576
</TABLE>





                 See notes to consolidated financial statements.

                                       5
<PAGE>


<TABLE>
<CAPTION>
Littlefield Corporation
CONSOLIDATED BALANCE SHEET (Unaudited)

                                     ASSETS
                                     ------
   Current Assets:                                                                            June 30, 2006
                                                                                        --------------------
<S>                                                                                              <C>
      Cash and cash equivalents                                                                  $2,518,314
      Accounts receivable, net of allowance for doubtful accounts of $84,108                      1,045,971
      Equity Securities, available for sale                                                           3,130
      Restricted Cash                                                                               918,290
      Other prepaid expenses and current assets                                                     241,727
                                                                                        --------------------
      Total Current Assets
                                                                                                  4,727,432
                                                                                        --------------------

   Property and Equipment - at cost, net of accumulated depreciation and amortization             6,153,556

   Other Assets:
      Goodwill                                                                                    4,905,111
      Intangible assets, net                                                                        641,445
      Other non-current assets                                                                      206,696
                                                                                        --------------------
      Total Other Assets                                                                          5,753,252
                                                                                        --------------------

   TOTAL ASSETS                                                                                 $16,634,240
                                                                                        ====================

                         LIABILITIES AND STOCKHOLDERS' EQUITY
                         ------------------------------------

   Current Liabilities:
      Long term debt, current portion                                                               172,506
      Trade accounts payable                                                                         67,222
      Legal Settlements - current portion                                                           120,000
      Reserve for settlements                                                                     3,200,000
      Other current liabilities - related party                                                     456,793
      Accrued expenses                                                                              475,407
                                                                                        --------------------
      Total Current Liabilities                                                                   4,491,928
                                                                                        --------------------

   Long-term Liabilities:
      Legal Settlements - net of current portion                                                     60,000
      Long term debt, net of current portion                                                      2,351,278
      Long term debt-related party                                                                  105,650
                                                                                        --------------------
      Total Long-term Liabilities
                                                                                                  2,516,928
                                                                                        --------------------
   Total Liabilities                                                                              7,008,856
                                                                                        --------------------

   Stockholders' Equity:
      Common stock, $.001 par value, (authorized 20,000,000 shares, issued
       11,959,532 shares, outstanding 10,833,334 shares)                                             11,960
      Additional paid-in capital                                                                 23,338,541
      Treasury stock - 1,126,198 shares, at cost                                                 (1,433,809)
      Accumulated Comprehensive Income                                                               (2,100)
      Accumulated deficit                                                                       (12,289,208)
                                                                                        --------------------
      Total Stockholders' Equity                                                                  9,625,384
                                                                                        --------------------

   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                   $16,634,240
                                                                                        ====================

</TABLE>

                 See notes to consolidated financial statements.

                                       6
<PAGE>

<TABLE>
<CAPTION>
Littlefield Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


Six Months Ended June 30,                                                         2006              2005
                                                                                               (Restated)
                                                                          -------------     -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                         <C>                 <C>
   Net income                                                               $1,161,107          $535,002
   Adjustments to reconcile net income to net cash provided by
    operating activities:
   Depreciation and amortization                                               380,235           490,423
   Gain on investment sales                                                                       (9,312)
   Stock-based compensation expense                                             81,358            66,750
   Gain on Exercise of Deferred Compensation                                                     (54,749)
   Increase (decrease) in cash flows as a result of changes in asset
    and liability account balances:
         Accounts receivable                                                   146,051          (152,845)
         Other assets and licenses                                             (41,980)           82,367
         Trade accounts payable                                               (358,443)          105,753
         Accrued expenses and other current liabilities                       (241,101)           35,556
                                                                          -------------     -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                    1,127,227         1,098,945
                                                                          -------------     -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Property and equipment expenditures                                        (175,727)         (162,564)
   Purchase of Intangibles                                                                             0
   Proceeds from sale of equity securities                                                        46,263
   Proceeds from collection of Note Receivable                               1,184,214           845,000
                                                                          -------------     -------------
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES
                                                                             1,008,487           728,699
                                                                          -------------     -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments on capital lease obligations                                       (65,668)          (35,446)
   Payments on notes payable                                                  (374,704)         (944,863)
   Proceeds from options exercised                                             158,000            59,750
   Collection of Subscriptions                                                  46,000                 0
                                                                          -------------     -------------
NET CASH (USED) IN FINANCING ACTIVITIES                                       (236,372)         (920,559)
                                                                          -------------     -------------

NET INCREASE IN CASH                                                         1,899,342           907,085

CASH AT BEGINNING OF PERIOD                                                    618,972           527,103
                                                                          -------------     -------------

CASH AT END OF PERIOD                                                       $2,518,314        $1,434,188
                                                                          =============     =============
</TABLE>

                 See notes to consolidated financial statements.

                                       7
<PAGE>

<TABLE>
<CAPTION>
Littlefield Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)



Six Months Ended June 30,                                                         2006              2005
                                                                          -------------     -------------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash payments:

<S>                                                                            <C>              <C>
   Interest                                                                    $96,718          $101,370
                                                                          =============     =============

   Income taxes                                                                     $0                $0
                                                                          =============     =============


Non-cash transactions:

   Acquisition of property, equipment and intangibles in exchange for
    notes payable                                                                   $0            $7,988


   Issuance of treasury stock for deferred compensation and 401K plan          $24,403                $0
                                                                          =============     =============
</TABLE>





                 See notes to consolidated financial statements.

                                       8
<PAGE>


Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
June 30, 2006


--------------------------------------------------------------------------------

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 preparation of the condensed consolidated financial statements in
conformity  with  U.S.  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  six-month  period  ended June 30, 2006 are not
necessarily  indicative  of the results that may be expected for the fiscal year
ending December 31, 2006.  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.

--------------------------------------------------------------------------------

NOTE 2 - RESTATEMENT.

--------------------------------------------------------------------------------

In July 2006, we identified certain errors that had resulted in misstatements of
previously reported stock option expenses. In July 2006 management and the Audit
Committee of the Board of Directors concluded that we would amend our previously
filed Form 10-Q for the quarter  ended  March 31,  2006 to correct our  reported
stock option expenses.  In August 2006 management and the Audit Committee of the
Board of Directors  concluded that we would also amend our previously filed 2005
Form 10-KSB to correct our reported  stock options  expenses.  Accordingly,  our
financial  statements  for 2005 and the first  quarter  of 2006 in our  original
filings  should no longer be relied  upon.  Management  and the  Chairman of the
Audit  Committee also discussed  these matters with our  independent  registered
public accountants.

The following table sets forth the effects of  restatements  made to correct the
error in our  reported  Q1 2006 stock  option  expenses  for a  modification  to
certain stock option agreements in 2005.

                                       9
<PAGE>


Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
June 30, 2006

--------------------------------------------------------------------------------

NOTE 2 - RESTATEMENT (Continued).

--------------------------------------------------------------------------------

                                                FOR THE QUARTER ENDED June 30,
Consolidated Statement of Operations                2005               2005
                                                                    Previously
                                                  Restated           Reported
Compensation Expense
                                                   $47,000                 $0
Total General and Administrative                   727,270            680,270
Operating Income                                  (167,054)          (120,054)
Net Income Before Taxes                            434,299
                                                                      481,299
Net Income                                         427,459            474,459
Net Comprehensive Income                          $427,425           $474,425
Basic Earnings Per Share                            $0.041
                                                                       $0.055
Diluted Earnings Per Share                          $0.041
                                                                       $0.054
Wtd Avg Shares Outstanding - Basic              10,333,151          8,550,509
Wtd Avg Shares Outstanding - Diluted            10,413,769          8,858,009


                                              FOR THE SIX MONTHS ENDED June 30,
Consolidated Statement of Operations                2005               2005
                                                                    Previously
                                                  Restated           Reported
Compensation Expense
                                                   $66,750                 $0
Total General and Administrative                 1,130,988          1,064,238
Operating Income                                    (6,403)            60,347
Net Income Before Taxes                            556,842            623,592
Net Income                                         535,002            601,752
Net Comprehensive Income                          $535,761            602,511
Basic Earnings Per Share                            $0.052
                                                                       $0.071
Diluted Earnings Per Share                          $0.052
                                                                       $0.068
Wtd Avg Shares Outstanding - Basic              10,263,810          8,481,168
Wtd Avg Shares Outstanding - Diluted            10,843,946          8,788,668



                                       10
<PAGE>


Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
June 30, 2006

--------------------------------------------------------------------------------

NOTE 3 - PROPERTY AND EQUIPMENT.

--------------------------------------------------------------------------------


           Property and equipment at June 30, 2006 consists of the following:

           Land                                                     $778,826
           Buildings                                               3,207,889
           Leasehold improvements                                  3,867,274
           Rental inventory and bingo equipment                    1,779,786
           Equipment, furniture and fixtures                       2,393,670
           Automobiles                                               406,037
                                                                -------------
                                                                  12,433,482

           Less:  Accumulated depreciation and amortization       (6,279,926)
                                                                -------------

           Property and equipment, net                            $6,153,556
                                                                =============

Total depreciation  expense, for owned and leased assets,  charged to operations
for the six months ended June 30, 2006 and 2005 was  approximately  $369,000 and
$475,000 respectively.

--------------------------------------------------------------------------------

NOTE 4 - GOODWILL & OTHER INTANGIBLE ASSETS.

--------------------------------------------------------------------------------

Goodwill at June 30, 2006 consists of the following:

<TABLE>
<CAPTION>
                                                Gross Carrying       Accumulated
                                                        Amount      Amortization             Total
                                                        ------      ------------             -----
<S>                                                <C>              <C>                <C>
   Goodwill                                        $6,704,907       $(1,799,796)       $4,905,111
                                                  ============      ============      ============

                                                 Entertainment       Hospitality
                                                 -------------       -----------

   Balance at December 31, 2005                    $4,533,727          $371,384        $4,905,111
   Goodwill acquired in the Quarter                        -0-               -0-               -0-
   Impairment losses                                       -0-               -0-               -0-
                                                  ------------      ------------      ------------
   Balance at June 30, 2006                        $4,533,727          $371,384        $4,905,111
                                                  ============      ============      ============

Intangible assets at June 30, 2006 consists of the following:

                                                Gross Carrying       Accumulated
                                                        Amount      Amortization             Total
                                                        ------      ------------             -----
   Intangible Assets with Indefinite Lives:
   Bingo licenses                                    $589,720          $(51,974)         $537,746


   Intangible Assets with Finite Lives:
   Covenants not to compete                          $297,500         $(193,801)         $103,699
                                                                                      ------------
   Intangible Assets, Net of Accumulated
    Amortization                                                                         $641,445
                                                                                      ============
</TABLE>

Amortization  expense  charged to  operations  for the six months ended June 30,
2006 and 2005 was approximately $11,000 and $15,000 respectively.

                                       11
<PAGE>


Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
June 30, 2006

--------------------------------------------------------------------------------

NOTE 5 - SHAREHOLDERS' EQUITY.

--------------------------------------------------------------------------------

At June 30,  2006 the  Company  holds  1,126,198  treasury  shares at an average
purchase cost of $1.27.

--------------------------------------------------------------------------------

NOTE 6 - SHARE BASED PAYMENTS.

--------------------------------------------------------------------------------

Effective  January 1, 2006,  the Company  adopted  FASB  Statement  of Financial
Accounting  Standards  No.  123R  (Revised  2004),  Share-Based  Payment,  which
requires that the compensation cost relating to share-based payment transactions
be recognized in financial statements based on the provisions of SFAS 123 issued
in 1995. We have adopted this statement using the modified prospective method of
implementation,  whereby the prospective method records the compensation expense
from the implementation date forward, but leaves prior periods unchanged.

The Company recorded approximately $81,000 in compensation expense in the period
ended June 30, 2006 related to options  issued under its  stock-based  incentive
compensation  plans. This includes expense related to both options issued in the
current year and options  issued in prior years for which the requisite  service
period for those  options  includes  the current  year.  The fair value of these
options  was  calculated   using  the   Black-Scholes   options  pricing  model.
Information  related to the  assumptions  used in this model is set forth in the
Company's  Annual  Report on Form 10-K for the fiscal  year ended  December  31,
2005. For options issued in 2006, the following  assumptions were used: dividend
yield of 10%,  expected  volatility of 68%, risk free interest rates of 5.0% and
an expected life of 7 years.

--------------------------------------------------------------------------------

NOTE 7 - PRO FORMA INFORMATION UNDER SFAS 123 FOR PERIODS PRIOR TO 2006.

--------------------------------------------------------------------------------

The following  table  represents the effect on net income and earnings per share
as if the Company had applied the fair-value  recognition provisions of SFAS 123
to all of its  share-based  compensation  awards for the quarter ending June 30,
2005:

<TABLE>
<CAPTION>
                                                                                Three Months Ended     Six Months Ended
                                                                                   June 30, 2005         June 30, 2005
                                                                                   -------------         -------------
                                                                                    (Restated)            (Restated)
                                                                                    ----------            ----------
<S>                                                                                 <C>                   <C>
    Net Income - as reported                                                        $ 427,459             $ 535,002
    Stock-based compensation included in reported net income, net of related
     tax effects                                                                       47,000                66,750
    Total stock-based compensation expense determined under the Fair Value
     Based method, net of related tax effects                                         (81,342)             (147,826)
                                                                                ---------------------------------------
    Net Income - pro forma                                                          $ 393,117             $ 453,926
    Earnings Per Share
    Basic - as reported                                                             $   0.041             $   0.052
    Basic - pro-forma                                                               $   0.038             $   0.044
    Diluted - as reported                                                           $   0.041             $   0.052
    Diluted - pro-forma                                                             $   0.038             $   0.044
</TABLE>




                                       12
<PAGE>


Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
June 30, 2006

--------------------------------------------------------------------------------

NOTE 8 - EARNINGS (LOSS) PER SHARE.

--------------------------------------------------------------------------------

A reconciliation of basic to diluted earnings per share is as follows:

<TABLE>
<CAPTION>
Six months ended June 30,                           2006              2006              2005              2005
-------------------------                           ----              ----              ----              ----
                                                                                     (Restated)        (Restated)
                                                                                     ----------        ----------
                                                    Basic            Diluted            Basic           Diluted
                                                --------------    --------------    --------------    -------------
Numerator:
----------                                      --------------    --------------    --------------    -------------
<S>                                                <C>               <C>                 <C>              <C>
    Net income (loss)                              $1,161,107        $1,161,107          $535,002         $535,002
                                                ==============    ==============    ==============    =============
Denominator:
------------
    Weighted average shares outstanding            10,626,668        10,626,668        10,263,810       10,263,810
    Effect of dilutive securities:
    Preferred stock                                       ---               ---               ---              ---
    Stock options and warrants                            ---           217,278               ---           89,766
                                                --------------    --------------    --------------    -------------
    Weighted average shares outstanding            10,626,668        10,843,946        10,263,810       10,353,576
                                                ==============    ==============    ==============    =============

                                                --------------    --------------    --------------    -------------
Earnings (loss) per share                               $.109             $.107             $.052            $.052
                                                ==============    ==============    ==============    =============
</TABLE>


--------------------------------------------------------------------------------

NOTE 9 - COMPREHENSIVE INCOME.

--------------------------------------------------------------------------------

The Company has adopted Financial  Accounting Standards Board Statement No. 130,
Reporting Comprehensive Income.  Statement No. 130 establishes new rules for the
reporting and display of comprehensive  income and its components;  however, the
adoption of this Statement has no impact on net income or shareholders'  equity.
Statement  No. 130 requires  unrealized  gains or losses to be included in other
comprehensive income.

The components of comprehensive  income for the quarters ended June 30, 2006 and
2005, are as follows:

                                                  2006              2005
                                                                 (Restated)
                                            ---------------    ---------------
              Net income                        $1,161,107           $535,002

              Other comprehensive income
                 Net unrealized gain                    $0               $759
                                            ---------------    ---------------

              Total comprehensive income        $1,161,107           $535,761
                                            ===============    ===============

--------------------------------------------------------------------------------

NOTE 10 - INCOME TAXES.

--------------------------------------------------------------------------------

The Company  recorded  approximately  $31,000  and  $22,000 of state  income tax
expense,  respectively,  for the six months  ended June 30,  2006 and 2005.  The
Company does not expect to incur  material  federal income tax charges until the
depletion  of its  accumulated  federal  income tax loss  carry-forwards,  which
totaled approximately $6,800,000 at December 31, 2005.

                                       13
<PAGE>


Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
June 30, 2006

--------------------------------------------------------------------------------

NOTE 11 - RELATED PARTY TRANSACTIONS.

--------------------------------------------------------------------------------

In  August  2001,  the  Company  acquired  Word of  Mouth  Custom  Catering.  In
conjunction with this purchase,  the Company issued two promissory notes payable
in the amount of $200,000 each to the two sellers (related parties),  as partial
consideration  for  this  purchase,   and  entered  into  three-year  employment
agreements with the sellers.  In November 2003, the relationship with one of the
sellers  changed  from that of an employee  to an  independent  contractor  on a
consulting basis, in August of 2004 the agreement  terminated with the remaining
employee as per the original  agreement.  The terms of the notes did not change.
These  notes  payable at an annual  rate of 8.0% and a  maturity  date of August
2005.  These  obligations  were paid in full in August 2005.  For the six months
ended  June  30,  2006  and  2005,   the  Company   recognized  $0  and  $3,000,
respectively, of interest expense related to these obligations.

The President  and CEO of the Company had  personally  guaranteed  $300,000 of a
note payable to a third party lender,  in the original total amount of $540,000.
The note was paid in full in May 2005.

The Company accrued a total of $61,275 in loan guaranty fees to its President in
2002.  This  amount  has been added to his bonus  amount  accrued in 2002 in the
amount of $300,000,  plus accrued interest and is presented on the balance sheet
as a long term liability - related party. For the six months ended June 30, 2006
and 2005, the Company recognized $12,088 and $13,950  respectively,  of interest
expense related to these obligations.

The Company purchased the President's  office furniture and antiques for a total
price of $105,650 in July 2002.  This amount was set up on a note  payable  with
interest  only  payments for 4 years at 6.75% with the  principal  amount due in
July 2006 as a balloon payment. In 2006, the note was revised with interest only
payments  for 5 years  at 6.75%  with the  principal  amount  due in July  2010.
Interest  paid on this note for the six months  ended June 30, 2006 and 2005 was
$3,565 and $3,565 respectively.

--------------------------------------------------------------------------------

NOTE 12 - 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.

800438 Ontario Ltd v. American Bingo and Gaming Corporation,  Case No.: 99-1161,
Circuit  Court  of the  Twelfth  Judicial  Circuit  in and for  Manatee  County,
Florida.

These two related cases arise from a transaction  carried out by a  predecessor,
American  Bingo & Gaming  Corporation  ("American  Bingo"),  in July 1995,  when
American Bingo bought three Florida bingo centers from two corporations owed and
controlled by Phillip Furtney.  More specifically,  American Bingo purchased the
assets of Pondella  Hall for Hire and  Fountains  Bingo from  Pondella  Hall for
Hire, Inc., and the stock of Bingo Trail from 800438 Ontario Ltd. American Bingo
paid the Furtney  controlled  entities over $450,000 at the time of purchase and
agreed to pay additional  compensation  of $450,000 over a period of twenty-four
months and  transfer  stock in American  Bingo  having a value of an  additional
$450,000.  Several months after the acquisition of the three halls,  the Florida
Attorney  General's office obtained an indictment and brought a civil proceeding
related to two of the three halls for alleged  gambling related  offenses.  This
investigation  had been ongoing at, and for some time prior to, the  acquisition
of the halls, but had not been disclosed to American Bingo by the sellers.  As a
result of these legal proceedings,  and the very real threat of additional legal
proceedings  against the American Bingo and its officers,  the halls were closed
and sold to third parties.  Additionally,  American Bingo settled the litigation
brought by the Florida  Attorney  General by pleading to  misdemeanor  sales tax
violations,  paying  substantial  fines,  and agreeing to terms which  precluded
American  Bingo from  business in the state of Florida.  (This  prohibition  has
since  been  lifted  as a result  of  further  negotiations  with  the  State of
Florida.)

                                       14
<PAGE>


Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
June 30, 2006

--------------------------------------------------------------------------------

NOTE 12 - COMMITMENTS AND CONTINGENCIES.

--------------------------------------------------------------------------------

American Bingo did not pay the remaining amounts under the acquisition contracts
since they believed the sellers  breached the  contracts and committed  fraud by
failing to disclose the ongoing  investigation by the Florida Attorney General's
office.  Pondella  filed a two count  Complaint  against  American  Bingo in the
Circuit  Court for Manatee  County,  alleging  breach of contract and common law
conversion.  At the same time,  800438  Ontario  also filed a similar  Complaint
against  American  Bingo for breach of contract.  American  Bingo  answered both
Complaints by denying the essential  allegations.  Additionally,  American Bingo
brought  Counterclaims   against  Pondella  and  800438  for  fraud,   negligent
misrepresentation,  breach  of  warranties,  contractual  indemnity,  breach  of
guaranty,  deceptive and unfair trade practices, and violation of Chapter 517 of
the Florida Statutes. American Bingo also brought claims against Furtney for his
role.  However,  Furtney,  a Canadian citizen and resident of Canada and Mexico,
would not accept service of American  Bingo's  Complaints and American Bingo was
unable to obtain  service of its Complaints on Furtney.  The Complaints  against
Furtney were dismissed before trial due to lack of service.

A jury trial on all claims,  except American Bingo's claims against Furtney, was
conducted in January 2005. The Jury found for Pondella and 800438 Ontario on all
their claims and against  American  Bingo on their claims  against  Pondella and
800438 Ontario. Following trial, the Judge granted American Bingo's motion for a
directed  verdict on Pondella's  claim for conversion.  The principal  amount of
Pondella's  judgment is $410,000 and with  interest and  attorney's  fees totals
$802,039. The principal amount of 800438 Ontario's judgment is $450,000 and with
interest and  attorney's  fees totals  $808,996.  The Company has appealed these
judgments  to the  Florida  Second  District  Court of  Appeal  and  intends  to
vigorously pursue its rights on appeal. Additionally, the Company has bonded off
both judgments,  which precludes any efforts to collect on the judgments  during
the appeal.  The range of potential  loss on these two cases is between zero and
the amount of the judgments,  plus accrued interest. The company accrued a total
of $1,610,000 on its financial  statements related to these matters,  $1,500,000
on the 2004 financial statements and $110,000 on its 2005 financial statements.

Littlefield Corporation f/k/a/ American Bingo and Gaming v. Philip Furtney, Case
No.:  2001 CA 4000,  Circuit  Court of the Twelfth  Judicial  Circuit in and for
Manatee County,  Florida. As set forth in the previous section, the Company also
brought claims  against  Philip  Furtney  related to his failure to disclose the
existence of the  investigation of the Florida  Attorney  General  regarding the
bingo halls  acquired by American  Bingo from the Furtney  controlled  entities.
These  claims  were  dismissed  from  the  original  litigation  based  upon the
Company's inability to serve the Complaints on Furtney, a foreign resident, when
he refused to voluntarily  accept service of the Complaints.  This dismissal did
not decide or relate to the merits of the claims  against  Furtney.  The Company
refiled the Complaints  against  Furtney in separate  litigation and was finally
successful  in serving  Furtney  when he  appeared  in Florida  for trial of the
Pondella/800438 Ontario cases in January 2005. The Company intends to vigorously
pursue its claims against Furtney.  The case against Furtney is in discovery and
the Company has a trial date of December 11, 2006.

Lenrich  Associates  LLC v.  Littlefield  Corporation,  et al;  Civil Action No.
00-CP-10-4742,  South  Carolina  Court of Common  Pleas,  County of  Charleston.
Lenrich Associates brought this action against the Company based on a commercial
lease  guaranty  that was  signed by the  Company.  The  tenant on the lease was
Concessions Corp., a subsidiary of the Company and had been used as the location
of the "Lucky II" facility, which was closed in early 2000. The lease expired in
February 2003. Because rental payments under the lease were in arrears,  Lenrich
Associates  sought to enforce the guaranty  against the Company.  The  Company's
liability  under the guaranty was capped at the lesser of two years of fixed and
additional rent or the amount of fixed and additional rent  corresponding to the
time period  mandated by South  Carolina  law. A settlement  agreement  had been
reached for  $147,500,  which has been  accrued for by the Company in June 2002.
However,  the  plaintiff  withdrew  their  support of the  settlement  agreement
shortly  thereafter.  Effective January 1, 2006 a settlement was reached between
the two parties in which  Littlefield  will pay a sum of  $500,000.  The Company
accrued  for  the  remaining  balance  of  approximately  $353,000  in the  2005
financial statements.  A payment was made in one lump sum payment of $250,000 on
January 3, 2006 and additional payment have been made in the amount of $10,000 a
month and will continue for the next 25 months, final payment to be made January
5, 2008.

                                       15
<PAGE>


Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
June 30, 2006

--------------------------------------------------------------------------------

NOTE 12 - COMMITMENTS AND CONTINGENCIES.

--------------------------------------------------------------------------------

Littlefield Corp. v. Dye, Civil Action No. 2002-cp-08-478.  The Company filed an
action on March 6, 2002, in Berkeley County,  South Carolina for collection on a
note signed by Danny C. Dye. The note,  which was executed on December 10, 1998,
was in the amount of $80,000.  The Company  alleges  that Dye still owes $58,481
toward the principle balance,  plus $19,257 in accrued interest through December
31,  2002.  On  January  14,  2003,   Mr.  Dye  amended  his  answer  to  assert
counterclaims  against  the  Company  for  fraudulent  breach  of  contract  and
violation of the South Carolina  Payment of Wages Act based on allegations  that
the Company failed to pay Dye amounts due under an employment contract.  Mr. Dye
has alleged that the Company  owes him $375,000 in unpaid  salary and is seeking
treble  damages  under the Payment of Wages Act for a total amount of $1,250,000
in damages.  The Company believes that the  counterclaims  are without merit and
the Company plans to contest them vigorously.

Collins Entertainment Corp. v. Coats and Coats Rental Amusement, d/b/a Ponderosa
Bingo and Shipwatch  Bingo,  Wayne Coats,  individually,  and American Bingo and
Gaming  Corp.;  American  Bingo and  Gaming  Corp.  v.  Coats  and Coats  Rental
Amusement, d/b/a Ponderosa Bingo and Shipwatch Bingo, Wayne Coats, individually,
Civil Action No. 97-CP-10-4685, South Carolina Court of Common Pleas, Charleston
County.  On  October  9,  1997,  Collins  Entertainment,  Inc.,  filed a lawsuit
alleging  the  Defendants  had  engaged  in  civil   conspiracy  and  tortiously
interfered  with the Plaintiff's  contract,  violating the South Carolina Unfair
Trade  Practices Act. The Plaintiff  sought actual damages in excess of $350,000
and an unspecified amount of punitive damages. The Company believed this lawsuit
was  completely  without merit;  however,  a judgment was issued on February 12,
2001 in favor of the plaintiff.  Damages of $157,000 were awarded in addition to
punitive  damages of  $1,570,000.  The Company  appealed  this decision with the
South  Carolina  appellate  court,  and the judgment was  affirmed.  The Company
applied  for a  re-hearing  with the  appellate  court,  which  threw  out their
original opinion.  However,  their new opinion also reaffirmed the judgment. The
Company filed an appeal with the South Carolina  Supreme  Court.  The appeal has
been  heard  and in  April  2006,  the  judgment  was  returned  in favor of the
plaintiff.  The Company has filed a petition with the Supreme  Court  requesting
reconsideration  of the  court's  decision.  The  decision  on the  petition  is
pending.  The potential outcomes in this matter fall within a range of $0 in the
event of a full and final  reversal of the judgment to the full judgment  amount
plus accrued simple  interest of 12% from the date of judgment plus court costs.
The company has accrued  $1,570,000 on its financial  statements related to this
matter. The actual damages of $157,000 were paid in 2001.

The South  Carolina  Supreme Court held oral argument on whether the trial court
and the  South  Carolina  Court  of  Appeals  committed  error in  holding  that
plaintiff  was a "lost  volume  seller."  The Company  asked the South  Carolina
Supreme Court to reject the lost volume seller doctrine entirely or to determine
that the  plaintiff is not a lost volume seller as a matter of law in this case.
Alternatively,  if the  South  Carolina  Supreme  Court  chose to adopt the lost
volume seller  doctrine and not rule on its express  application  as a matter of
law,  the Company  requested  that the court  vacate the judgment and remand the
case to the trial ourt for a new trial on the  application  of the doctrine and,
consequently,  the amount of damages.  In a split  decision,  the South Carolina
Supreme  Court  affirmed the decision of the Court of Appeals on April 10, 2006.
The Company filed a petition with the court  requesting  reconsideration  of the
court's decision. This petition was denied. The Company continues to explore all
options in the case,  including a further  appeal to the United  States  Supreme
Court, to address  constitutional  challenges to the punitive damages awarded in
this case that the South Carolina Supreme Court declined to address.

Amy Ramon and Jessica Searsy v. Clark C. Lilly, Littlefield Corporation, Managed
Care Center for  Addictive and Other  Disorders,  Inc.,  South Plains  Volunteer
Services,  Inc.,  Marion Moss  Enterprises,  Inc.,  Alcoholic Service Knocks for
Women, Inc. and Lubbock Area Addictive  Services.  Cause No. 2006-535,397 in the
237th District Court of Lubbock County, Texas. This case involves claims brought
by two bingo  employees  of various  charities  which  operate from a bingo hall
leased to the charities by Littlefield  Corporation.  The plaintiffs  claim that
the bingo hall manager  sexually  harassed them and terminated them in violation
of their rights under  nondiscrimination  provisions of the Texas Labor Code and
also assert  various tort claims against  Littlefield  under state law including
claims  for  negligent  supervision  and  retention  of  the  alleged  harasser.
Plaintiffs  allege that  Littlefield  was their employer and the employer of the
accused harasser.  Discovery has just begun in this case. Littlefield intends to
vigorously defend this case because the plaintiffs and the alleged harasser were
not its employees.

Christina Caudle v. Clark C. Lilly, Littlefield Corporation, Managed Care Center
for Addictive and Other Disorders,  Inc., South Plains Volunteer Services, Inc.,
Marion Moss  Enterprises,  Inc.,  Alcoholic  Service Knocks for Women,  Inc. and
Lubbock Area Addictive  Services.  Cause No.  2006-535,400  in the 99th District
Court of Lubbock  County,  Texas.  This case involves  claims brought by a bingo
employee  of various  charities  which  operate  from a bingo hall leased to the
charities by Littlefield Corporation.

                                       16
<PAGE>


The Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
June 30, 2006

--------------------------------------------------------------------------------

NOTE 12 - COMMITMENTS AND CONTINGENCIES.

--------------------------------------------------------------------------------

The  plaintiff  claims that the bingo hall  manager  sexually  harassed  her and
terminated them in violation of their rights under nondiscrimination  provisions
of the Texas Labor Code and also asserts various tort claims against Littlefield
under state law  including  claims for  negligent  hiring and  retention  of the
alleged  harasser.  Plaintiff  alleges that Littlefield was her employer and the
employer  of the  accused  harasser.  Discovery  has just  begun  in this  case.
Littlefield intends to vigorously defend this case because the plaintiff and the
alleged harasser were not its employees.

Courtney A.  Bigham v. Clark C. Lilly,  Littlefield  Corporation,  Managed  Care
Center for Addictive and Other Disorders, Inc., South Plains Volunteer Services,
Inc.,  Marion Moss Enterprises,  Inc.,  Alcoholic Service Knocks for Women, Inc.
and Lubbock Area.

Addictive Services. Cause No. 2006-535,453 in the 99th District Court of Lubbock
County,  Texas. This case involves claims brought by a bingo employee of various
charities which operate from a bingo hall leased to the charities by Littlefield
Corporation.  The plaintiff claims that the bingo hall manager sexually harassed
her and  terminated  them in violation  of their rights under  nondiscrimination
provisions of the Texas Labor Code and also asserts  various tort claims against
Littlefield  under state law including claims for negligent hiring and retention
of the alleged harasser. Plaintiff alleges that Littlefield was her employer and
the  employer of the accused  harasser.  Discovery  has just begun in this case.
Littlefield intends to vigorously defend this case because the plaintiff and the
alleged harasser were not its employees.

Regina Butler v. Clark C. Lilly,  Littlefield  Corporation,  Managed Care Center
for Addictive and Other Disorders,  Inc., South Plains Volunteer Services, Inc.,
Marion Moss  Enterprises,  Inc.,  Alcoholic  Service Knocks for Women,  Inc. and
Lubbock Area Addictive  Services.  Cause No.  2006-535,470  in the 72th District
Court of Lubbock  County,  Texas.  This case involves  claims brought by a bingo
employee  of various  charities  which  operate  from a bingo hall leased to the
charities by Littlefield  Corporation.  The plaintiff claims that the bingo hall
manager  sexually  harassed her and terminated them in violation of their rights
under  nondiscrimination  provisions  of the Texas  Labor Code and also  asserts
various tort claims  against  Littlefield  under state law including  claims for
negligent hiring and retention of the alleged  harasser.  Plaintiff also asserts
claims for retaliatory discharge, negligent supervision,  intentional infliction
of emotional distress,  slander & libel.  Plaintiff alleges that Littlefield was
her employer and the employer of the accused harasser.  Discovery has just begun
in this case.  Littlefield  intends to  vigorously  defend this case because the
plaintiff and the alleged harasser were not its employees.


--------------------------------------------------------------------------------

NOTE 13 - SEGMENTS.

--------------------------------------------------------------------------------


The Company's  Chief Operating  Decision Maker ("CODM"),  the President and CEO,
evaluates  performance  and  allocates  resources  based on a measure of segment
profit or loss from operations.

The Company has identified two operating  segments based on the different nature
of the  services  and  legislative  monitoring  and,  in  general,  the  type of
customers for those  services in the current year and two in the prior year. The
entertainment  segment  encompasses bingo center services provided to charitable
organizations in South Carolina,  Texas and Alabama.  The Hospitality segment is
the tent  rental  business  (acquired  November  2000) and the party  rental and
catering businesses in Austin,  Texas, which were acquired in July and August of
2001.



                                       17
<PAGE>


Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
June 30, 2006

--------------------------------------------------------------------------------

NOTE 13 - SEGMENTS (Continued).

--------------------------------------------------------------------------------

A  summary  of the  segment  financial  information  reported  to the CODM is as
follows:

<TABLE>
<CAPTION>
     June 30, 2006
     -------------
                                        Entertainment  Hospitality  Adjustment  Consolidated
                                        -------------  -----------  ----------  ------------
<S>                                       <C>          <C>            <C>        <C>
     Revenue                              $4,168,000   $2,323,000     $43,000    $6,534,000
     Depreciation and Amortization           207,000      123,000      50,000       380,000
     Segment profit (loss)                 1,941,000      (11,000)   (769,000)    1,161,000
     Segment Assets                       24,193,000    1,462,000  (9,021,000)   16,634,000

     June 30, 2005 (Restated)
     ------------------------
                                        Entertainment  Hospitality  Adjustment  Consolidated
                                        -------------  -----------  ----------  ------------
     Revenue                              $3,492,000   $1,938,000     $57,000    $5,487,000
     Depreciation and Amortization           256,000      187,000      47,000       490,000
     Segment profit (loss)                 1,180,000     (195,000)   (450,000)      535,000
     Segment Assets                       22,942,000    1,495,000  (9,390,000)   15,047,000
</TABLE>

The adjustments represent other income, depreciation and amortization related to
corporate  assets,  corporate  losses,  corporate  assets and corporate  capital
expenditures to reconcile segment balances to consolidated balances.

--------------------------------------------------------------------------------

NOTE 14 -- SUBSEQUENT EVENTS.

--------------------------------------------------------------------------------

July 2006 - Troy D. Zinn,  Chief Financial  Officer resigned his position within
the Company.
July 2006 - Richard S. Chilinski  hired as the Chief  Financial  Officer for the
Company.


                                       18
<PAGE>


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Our  Company  was formed in 1994 as a Delaware  corporation  to  consummate  the
acquisition  of  charitable  bingo  centers  and video  gaming  operations,  and
completed the initial public offering in December of 1994. We operate  primarily
through wholly owned subsidiaries in Texas, Alabama and South Carolina.

The statements in this Quarterly  Report on Form 10-QSB relating to matters that
are not historical facts, including, but not limited to statements found in this
"Management  Discussion  and  Analysis  of  Financial  Condition  and Results of
Operations",  are forward-looking  statements that involve a number of risks and
uncertainties.  Factors  that  could  cause  actual  future  results  to  differ
materially from those expressed in such forward-looking  statements include, but
are not limited to the impact of government  regulation  and taxation,  customer
attendance,  spending, competition, general economic conditions, and other risks
and  uncertainties  as  discussed in this  Quarterly  Report and the 2005 Annual
report on Form 10-KSB.

On July 21, 2006, we announced  that we would  restate our  unaudited  financial
statements  for the first quarter of 2006 to correct an error in accounting  for
share based  compensation  in that  quarter.  The amended Form  10-QSB/A for the
quarter ended March 31, 2006, is being filed on the same day as this Form 10-QSB
for the quarter ended June 30, 2006.  This 10-QSB for the second quarter of 2006
contains  all  financial  adjustments  and is  based on the  restated  financial
statements for the first quarter of 2006.

On August 14, 2006, we announced that we would restate our financial  statements
for the year ended December 31, 2005. This 2005  restatement also relates to the
proper recording of expenses related to share based compensation.  References in
this 10-QSB to our operations, assets, liabilities and cash flows for the second
quarter  of  2005  and  the  full  year  2005  include  revisions  to  financial
information  for the  period  ended  December  31,  2005.  We expect to file the
amended Form 10-KSB/A  containing  restated  financial  statements  for the year
ended December 31, 2005, within the next ten days.

We intend to grow our business  through  acquisitions and the selective start up
of  charitable  bingo halls in markets in which we  currently  operate and other
attractive markets.

Results of Operations
---------------------

We incurred a net profit of approximately $1,161,000 for the first six months of
2006,  which equated to a basic and fully  diluted  earnings per share of $0.109
and $0.107  respectively,  which  represented an  improvement  of  approximately
$626,000 over our net profit of $535,000 for the first six months of 2005, which
was $0.052 per basic and $0.052 fully diluted share. The weighted average number
of basic Common Stock shares  outstanding  totaled  10,626,668  in the first six
months of 2006 as compared to 10,263,810 in the first six months of 2005.

Revenues
--------
                             2006          2005          Change      % Change
                             ----          ----          ------      --------
                                        (Restated)
                                        ----------
       Total Revenues     $ 6,534,000   $ 5,487,000   $ 1,047,000       19%
       Entertainment        4,168,000     3,492,000       676,000       19%
         Texas              2,421,000     1,947,000       474,000       24%
         South Carolina       901,000       751,000       150,000       20%
         Alabama              846,000       794,000        52,000        7%
       Hospitality        $ 2,323,000   $ 1,938,000   $   385,000       20%

Revenues for the Company increased 19% over the same period in 2005 with both
the Entertainment and the Hospitality divisions contributing. Entertainment
accounted for 64% of total revenues compared with 64% of total revenues in 2005.
By state Entertainment revenues break down for Texas, South Carolina and Alabama
as 58%, 22%, and 20% respectively compared to 55%, 22% and 23% in the first six
months of 2005. Hospitality accounted for 36% of total revenues for the six
months, compared to 35% of total revenues in 2005.

Net Income
----------
                               2006          2005          Change
                               ----          ----          ------
                                           Restated
                                           --------
       Total Net Income    $ 1,161,000   $   535,000     $   626,000
       Entertainment         1,941,000     1,180,000         761,000
       Hospitality         $   (11,000)  $  (195,000)    $   184,000

                                       19
<PAGE>


The Company  realized  net income in the first six months of 2006 of  $1,161,000
compared  to a net  income  of  $535,000  for  the  same  period  in  2005.  The
Entertainment  division improved by 65% while the Hospitality division decreased
their  loss.  These  increases  can  be  attributed  to  improved  revenues  and
management's concentration on cost savings throughout the organization.


Costs and Expenses
------------------

Rent and utilities were up approximately $158,000 or 15% in the first six months
of 2006 as compared to the same period in 2005. This increase is largely related
to a greater  number of  facilities in 2006 than were present in the same period
of 2005. The remainder of the rent increase is a result of the annual  increases
in rent and higher utility costs.  Other direct  operating  costs were up 12% in
the first  quarter  of 2006 as  compared  to the same  period  in 2005.  This is
related to higher costs of goods sold, higher property taxes, and higher repairs
and maintenance at our facilities than occurred in the first six months of 2005.
License  expense was up 164%,  a result of the timing of the payment on licenses
and a change from  accruing  license  expense into a prepaid  asset  account and
simply expensing when it is submitted.

Depreciation and amortization expense totaled  approximately  $380,000 ($330,000
Direct plus  $50,000  G&A) in the first six months of 2006,  a decrease of about
$110,000 from the first six months of 2005.  The decrease is largely a result of
the disposition of assets in late 2005.

General and administrative expenses,  excluding related depreciation expense and
stock based compensation expense totaled approximately $608,000 in the first six
months of 2006,  compared to  approximately  $1,017,000  in 2005,  a decrease of
about $409,000,  all relating to higher legal expenses in 2005. For compensation
expense related to options, see Note 6, Share Based Payments.

Other income and expense was an expense of  approximately  $23,000 for the first
six months of 2006,  compared to other income of approximately  $563,000 for the
first  six  months  of  2005.  The  income  in 2005  was  mainly  from a gain on
settlement on a note receivable.  The remaining expenses were interest expenses.
Interest expense was down approximately $26,000 compared to the first six months
in 2005. This was a result of lower debt in the first six months of 2006.

Liquidity and Capital Resources
-------------------------------

Cash and cash equivalents at June 30, 2006, totaled approximately $2,518,000 and
represented approximately 15% of total assets of approximately $16,634,000. Cash
provided  from  operating  activities  for the six months  ended June 30,  2006,
totaled approximately  $1,127,000 compared to cash provided of $1,099,000 during
the same  period of 2005,  an  increase  of  approximately  $28,000.  Cash flows
provided by operating  activities in the first six months of 2006 were increased
by the net income of approximately $1,161,000,  non-cash depreciation expense of
approximately  $380,000,  increased by stock based compensation of approximately
$81,000  and  offset by  results of change in asset and  liability  accounts  of
approximately $495,000.

Net cash provided in investing activities totaled  approximately  $1,008,000 for
the  six  months  ended  June  30,  2006,  compared  to  net  cash  provided  of
approximately  $729,000 in the six months ended June 30, 2005.  In the first six
months,  cash was used in the amount of approximately  $176,000 for the purchase
of capital  assets  and offset by the  collection  of a note  receivable  in the
amount of  approximately  $1,184,000.  In the same six month period of 2005 cash
was used for the purchase of capital assets of about $163,000.

Cash  used by  financing  activities  in the first  six  months of 2006  totaled
approximately  $236,000, as compared to net cash used in financing activities in
the first six months of 2005 of approximately  $921,000. In the six months ended
June 30,  2006,  approximately  $441,000 of cash was used to pay down the normal
principle  payments  on both  capital  leases and notes  payable,  increased  by
$46,000 from the  collection  of a  subscription  receivable  and  approximately
$158,000 from the exercising of stock options by employees.

Current assets totaled  approximately  $4,727,000 at June 30, 2006,  leaving the
Company with working  capital of  approximately  $236,000 and a current ratio of
1.05 to 1. Legal  reserves  totaling  $3,320,000  ($3,200,000  legal  reserves +
$120,000  legal  settlements)  are  included  in current  liabilities,  of which
$1,610,000,  related  to the  Pondella  Hall  case  discussed  in Note 12 to the
unaudited financial  statements,  is not expected to be paid, if at all, for one
to two years. The remaining reserved amount of $1,570,000 relates to the Collins
Entertainment   judgment  discussed  in  Note  11  to  the  unaudited  financial
statements  and  $20,000 of accrued for other.  The  $120,000  legal  settlement
represents the current portion of the Lenrich settlement discussed in Note 12 of
the unaudited financial statements.

At June 30, 2006, we had  approximately  $16,634,000  in total assets with total
liabilities  of  approximately   $7,009,000  and  approximately   $9,625,000  of
shareholders  equity.  Total assets  include  approximately  $2,518,000 in cash,
$1,291,000 of other current assets and net account  receivables  and $918,000 of
restricted cash, $6,154,000 of property and equipment,  $5,547,000 of intangible
assets,  and $207,000 of other assets.  Total  liabilities  primarily consist of
accounts payable of approximately  $67,000,  notes and capital lease obligations
of approximately $2,524,000 and accrued liabilities,  other current liabilities-
related party and legal settlements and reserves of $4,418,000.

                                       20
<PAGE>

Item 3.  Controls and Procedures

The  Company's  management  evaluated,  with  the  participation  of  the  Chief
Executive  Officer  and  Chief  Financial  Officer,  the  effectiveness  of  the
Company's disclosure controls and procedures as of the end of the period covered
by this  report.  Disclosure  controls  and  procedures  are  designed  with the
objective  of ensuring  that (i)  information  required to be  disclosed  in the
Company's  reports filed under the Securities  Exchange Act of 1934 is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
SEC's rules and forms and (ii) the information is accumulated  and  communicated
to management, including the principal executive officer and principal financial
officer,   as  appropriate  to  allow  timely   decisions   regarding   required
disclosures.

After the  close of the  second  fiscal  quarter  covered  by this  Report,  the
Company's  management and board of directors determined that it was necessary to
restate the financial results for the first quarter of 2006 because of errors in
accounting for share based compensation in the first quarter,  which occurred in
connection  with  the  Company's  accounting  for  stock  option  expense  under
Statement   of  Financial   Accounting   Standards   No.   123R,   "Share  Based
Compensation,"  which the Company adopted in the first quarter of 2006.  Because
of the required  amendment to our financial  statements  made after the close of
the second  fiscal  quarter,  our Chief  Executive  Officer and Chief  Financial
Officer  concluded  that,  as of June 30,  3006,  our  disclosure  controls  and
procedures  were not  effective  due to the fact that we had failed to correctly
account for share based compensation expense.

The  restated  financial  statements  for the first  quarter  are  contained  in
Amendment  No. 1 to the  Company's  report on Form 10-QSB/A for the period ended
March 31, 2006, which has been filed with the SEC, August 21, 2006, the same day
as the filing of this Form 10-QSB for the period ended June 30, 2006. Net Income
in Q1 2006 was increased by  approximately  $341,000 as a result of a correction
in the accounting for stock options.  The Company had originally booked expenses
of approximately $365,000 related to the stock options and upon discovery of the
error,  management  and the Board of Directors  made the decision to restate the
10-QSB for the first quarter of 2006.

We have taken steps to improve our  internal  control over  financial  reporting
during  and after the second  fiscal  quarter  of 2006,  including  hiring of an
outside  consultant  to advise  management  on the proper  accounting  for stock
options,  strengthening  the formal  process of  documenting  changes to options
issued, and requiring two officers to verify the documentation of the changes or
exercising of stock options. Other than the changes described in this paragraph,
there  have  been no  other  changes  in our  internal  control  over  financial
reporting  during the fiscal quarter ended June 30, 2006,  that have  materially
affected,  or are reasonably likely to materially  affect,  our internal control
over financial reporting.

Our  management,  including  the Chief  Executive  Officer  and Chief  Financial
Officer,  believe that, with the changes  described in the preceding  paragraph,
our disclosure  controls and procedures are effective,  as of the date of filing
this quarterly report on Form 10-QSB, to ensure that information  required to be
disclosed  by us in the  reports  that we file or submit  under  the  Securities
Exchange Act of 1934 is recorded, processed,  summarized and reported within the
time periods specified in the SEC rules and forms.


PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

For a  discussion  of material  pending  legal  proceedings,  see Note 12 to the
unaudited  Consolidated  Financial  Statements included in Part I hereof,  which
Note 12 is incorporated herein by reference.

Item 6.  Exhibits

         31.1    Rule 31a-14(a) / 15d-14(a) Certifications

         32.1    Section 1350 Certifications


                                       21
<PAGE>


                                   SIGNATURES

In accordance with the requirements of the Securities  Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                         Littlefield Corporation

                                         August 21, 2006

                                         By:

                                         /s/  JEFFREY L MINCH
                                         --------------------
                                         Jeffrey L. Minch
                                         President and Chief Executive Officer


                                         /s/  TROY D. ZINN
                                         -----------------
                                         Troy D. Zinn
                                         Secretary and Treasurer
                                         (Chief Financial Officer)



                                       22