UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2008 or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to ________________
Commission file number: 0-24805
LITTLEFIELD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-2723809
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2501 N Lamar Blvd
Austin, Texas 78705
------------- -----
(address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (512) 476-5141
-----------------
Indicate by check mark whether the registrant (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 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 large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [_] Accelerated filer [_]
Non-accelerated filer [_] Smaller Reporting Company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [_] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 25, 2008
Common Stock - $0.001 par value 16,715,190
Littlefield Corporation
FORM 10-Q
For the quarter ended March 31, 2008
INDEX
Part I. FINANCIAL INFORMATION
Item 1 Financial Statements
a) Consolidated Balance Sheets as of March 31, 2008 (unaudited)
and December 31, 2007 2
b) Consolidated Statements of Operations (unaudited) for the
Three Months Ended March 31, 2008 and 2007 3
c) Consolidated Statements of Cash Flows (unaudited) for the Three
Months Ended March 31, 2008 and 2007 5
d) Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial Condition
And Results of Operations 16
Item 3 Quantitative and Qualitative Disclosures about Market Risk 18
Item 4 Controls and Procedures 19
Part II. OTHER INFORMATION
Item 1 Legal Proceedings 19
Item 6 Exhibits 19
Signatures and Certifications 20
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Littlefield Corporation
CONSOLIDATED BALANCE SHEETS
ASSETS
------
March 31, 2008 December 31, 2007
----------------- -----------------
(unaudited)
Current Assets:
Cash and cash equivalents $ 7,719,987 $ 1,965,624
Accounts receivable, net of allowance for
doubtful accounts of $67,457 and $126,309 614,312 519,845
Other current assets 307,231 549,194
Note receivable 4,853 5,103
----------------- -----------------
Total Current Assets 8,646,383 3,039,766
----------------- -----------------
Property and Equipment - at cost, net of
accumulated depreciation and amortization 7,481,811 6,926,559
Other Assets:
Goodwill 5,138,624 4,905,111
Intangible assets, net 841,342 699,196
Other non-current assets 204,715 217,615
----------------- -----------------
Total Other Assets 6,184,681 5,821,922
----------------- -----------------
TOTAL ASSETS $ 22,312,875 $ 15,788,247
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Long term debt, current portion $ 196,779 $ 195,517
Long term debt, legal settlements, current
portion 231,272 231,272
Trade accounts payable 384,411 232,339
Accrued expenses 814,036 1,063,053
----------------- -----------------
Total Current Liabilities 1,626,498 1,722,181
----------------- -----------------
Long-term Liabilities:
Long term debt, net of current portion 3,395,839 3,442,932
Long term debt, legal settlements, net of
current portion 308,128 362,964
Other liabilities, related party 54,000 48,000
----------------- -----------------
Total Long-term Liabilities 3,757,967 3,853,896
----------------- -----------------
Total Liabilities 5,384,465 5,576,077
----------------- -----------------
Stockholders' Equity:
Common stock, $0.001 par value, (authorized
20,000,000 shares, issued 17,534,707
shares, outstanding 16,715,190 shares) 17,535 12,344
Additional paid-in-capital 30,661,075 23,710,845
Treasury stock - 819,517 shares, at cost (1,044,324) (1,146,638)
Accumulated deficit (12,705,876) (12,364,381)
----------------- -----------------
Total Stockholders' Equity 16,928,410 10,212,170
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 22,312,875 $ 15,788,247
================= =================
See notes to consolidated financial statements.
2
Littlefield Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31,
2008 2007
------------------ --------------
REVENUES:
Entertainment $ 2,249,987 $ 2,334,101
Hospitality 854,002 1,143,396
Other 19,942 11,623
------------------ --------------
TOTAL REVENUES 3,123,931 3,489,120
------------------ --------------
DIRECT COSTS AND EXPENSES:
Direct salaries and other compensation 749,147 768,623
Rent and utilities 656,340 617,201
Other direct operating costs 1,007,517 801,753
Depreciation and amortization 201,372 156,061
License expense 27,484 30,829
------------------ --------------
TOTAL COSTS AND EXPENSES 2,641,860 2,374,467
------------------ --------------
GROSS MARGIN 482,071 1,114,653
GENERAL AND ADMINISTRATIVE EXPENSES:
Salaries and other compensation 319,155 273,030
Legal and accounting fees 168,860 110,388
Depreciation and amortization 31,981 28,600
Share-based compensation expense 14,311 14,311
Other general and administrative 201,184 195,238
------------------ --------------
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES 735,491 621,567
OPERATING INCOME (LOSS) (253,420) 493,086
OTHER INCOME AND EXPENSES:
Interest and investment income 12,653 14,942
Interest expense ($0 and $5,063 respectively to
related parties) (78,718) (129,888)
------------------ --------------
TOTAL OTHER INCOME AND EXPENSES (66,065) (114,946)
------------------ --------------
NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (319,485) 378,140
PROVISION FOR INCOME TAXES 22,010 20,000
------------------ --------------
NET INCOME (LOSS) (341,495) 358,140
OTHER COMPREHENSIVE INCOME --- 33
------------------ --------------
NET COMPREHENSIVE INCOME (LOSS) ($341,495) $ 358,173
================== ==============
See notes to consolidated financial statements.
3
Littlefield Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31,
2008 2007
-------------- ----------------
EARNINGS (LOSS) PER SHARE:
Basic earnings per share ($ 0.029) $ 0.033
============== ================
Diluted earnings per share ($ 0.029) $ 0.032
============== ================
Weighted average shares outstanding - basic 11,738,662 10,955,719
============== ================
Weighted average shares outstanding - diluted 11,738,662 11,178,523
============== ================
See notes to consolidated financial statements.
4
Littlefield Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31,
--------------------------------
2008 2007
--------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (341,495) $ 358,140
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:
Depreciation and amortization 233,353 184,661
Bad debt allowance (58,852) ---
Stock-based compensation expense 14,311 14,311
Increase (decrease) in cash flows as a result of changes in asset
and liability account balances:
Accounts receivable (35,616) 188,185
Other assets 255,113 (44,301)
Trade accounts payable 152,072 (155,633)
Accrued expenses and other current liabilities (226,283) (139,918)
--------------- ----------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (7,397) 405,445
--------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (781,230) (126,018)
Purchase of goodwill and intangibles (383,033) --
--------------- ----------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (1,164,263) (126,018)
--------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable, legal settlements and capital leases (100,667) (107,425)
Proceeds from sale of common stock 7,000,000 476,560
Proceeds from options exercised 26,690 ---
--------------- ----------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 6,926,023 369,135
--------------- ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,754,363 648,562
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,965,624 2,549,566
--------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,719,987 $ 3,198,128
=============== ================
See notes to consolidated financial statements.
5
Littlefield Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended March 31,
-----------------------------
2008 2007
------------ ----------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments:
Interest $ 79,233 $ 124,819
============ ================
Income taxes $ 5,789 $ 275
============ ================
Non-cash transactions:
Issuance of treasury stock under deferred
compensation plan --- ---
============ ================
Issuance of treasury stock under employee stock
purchase plan $ 16,734 ---
============ ================
See notes to consolidated financial statements.
6
Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
March 31, 2008
--------------------------------------------------------------------------------
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 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 financial statements have been reclassified to maintain consistency
and comparability for all periods presented.
The operating results for the three month period ended March 31, 2008 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2008. 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-Q 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 - PROPERTY AND EQUIPMENT.
--------------------------------------------------------------------------------
Property and equipment at March 31, 2008 and December 31, 2007 consists of the
following:
March 31, 2008 December 31, 2007
Land $ 740,467 $ 740,467
Buildings 3,395,498 3,404,348
Leasehold improvements 5,046,362 4,756,267
Rental inventory and bingo equipment 2,022,155 1,989,605
Equipment, furniture and fixtures 3,023,726 2,604,406
Automobiles 516,741 468,626
------------------ --------------------
14,744,949 13,963,719
Less: Accumulated depreciation and
amortization (7,263,138) (7,037,160)
------------------ --------------------
Property and equipment, net $ 7,481,811 $ 6,926,559
================== ====================
Total depreciation expense, for owned and leased assets, charged to operations
for the three months ended March 31, 2008 and 2007 was approximately $226,000
and $177,300 respectively.
7
Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
March 31, 2008
--------------------------------------------------------------------------------
NOTE 3 - GOODWILL & OTHER INTANGIBLE ASSETS.
--------------------------------------------------------------------------------
Goodwill at March 31, 2008 is as follows:
Gross
Carrying Accumulated
Amount Amortization Total
--------------- --------------- --------------
Goodwill at December 31, 2007 $ 6,704,375 $ (1,799,264) $ 4,905,111
Goodwill acquired during period 233,513 233,513
--------------- --------------- --------------
Goodwill at March 31, 2008 $ 6,937,888 $ (1,799,264) $ 5,138,624
=============== =============== ==============
Entertainment Hospitality Total
--------------- --------------- --------------
Balance at December 31, 2007 $ 4,533,727 $ 371,384 $ 4,905,111
Goodwill acquired during the year 233,513 --- 233,513
--------------- --------------- --------------
Balance at March 31, 2008 $ 4,767,240 $ 371,384 $ 5,138,624
=============== =============== ==============
Intangible assets at March 31, 2008 consists of the following:
Gross Accumulated
Carrying Amortization Total
Amount
------------ -------------- -----------
Intangible Assets with Indefinite Lives:
Bingo licenses at December 31, 2007 $ 694,719 (51,974) $ 642,745
Licenses acquired during the period 150,054 150,054
------------ -----------
Bingo licenses at March 31, 2008 $ 844,773 (51,974) $ 792,799
Intangible Assets with Finite Lives:
Covenants not to compete $ 297,500 (248,957) $ 48,543
-----------
Intangible Assets, Net of Accumulated
Amortization $ 841,342
===========
Amortization expense charged to operations for the three months ended March 31,
2008 and 2007 was approximately $7,400 and $7,400 respectively.
--------------------------------------------------------------------------------
NOTE 4 - SHAREHOLDERS' EQUITY.
--------------------------------------------------------------------------------
At March 31, 2008 the Company holds 819,517 treasury shares at an average
purchase cost of $1.27.
8
Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
March 31, 2008
--------------------------------------------------------------------------------
NOTE 5 - 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 $14,000 in compensation expense in the three
month periods ended March 31, 2008 and March 31, 2007 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. There were no options issued in the three
month periods ended March 31, 2008 and 2007.
--------------------------------------------------------------------------------
NOTE 6 - EARNINGS PER SHARE.
--------------------------------------------------------------------------------
A reconciliation of basic to diluted earnings per share is as follows:
Three months ended March 31, 2008 2008 2007 2007
----------------------------
Basic Diluted Basic Diluted
------------- -------------- ------------- -------------
Numerator:
----------
Net income (loss) $ (341,495) $ (341,495) $ 358,140 $ 358,140
============= ============== ============= =============
Denominator:
------------
Weighted average shares outstanding 11,738,662 11,738,662 10,955,719 10,955,719
Effect of dilutive securities:
Stock options and warrants --- --- --- 222,804
------------- -------------- ------------- -------------
Weighted average shares outstanding 11,738,662 11,738,662 10,955,719 11,178,523
============= ============== ============= =============
Earnings (loss) per share $ (0.029) $ (0.029) $ 0.033 $ 0.032
============= ============== ============= =============
Stock options to acquire 299,333 and 94,500 shares for the three months ended
March 31, 2008 and 2007, respectively were excluded in the computations of
diluted EPS because the effect of including the stock options would have been
anti-dilutive.
9
Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
March 31, 2008
--------------------------------------------------------------------------------
NOTE 7 - ACCOUNTING FOR STOCK BASED COMPENSATION
--------------------------------------------------------------------------------
The Company applies FASB Statement of Financial Accounting Standards No. 123R
(Revised 2004), Share Based Payment, using the modified prospective method of
implementation, whereby the prospective method records the compensation expense
from the implementation date forward, however leaves prior periods recorded in
accordance with APB Opinion No. 25 Accounting for Stock Issued to Employees
("APB 25") in accounting for its stock options. At March 31, 2008, the Company
has implemented five shareholder approved stock option plans. These plans are
intended to comply with Section 422 of the Internal Revenue Code of 1986, as
amended. The plans collectively provide for the total issuance of 3,600,000
common shares, as adjusted for the 20% stock dividend in 2006, over ten years
from the date of each plan's approval. In addition, the plans allow for
additional increases of 15% of the then outstanding shares each year through
2008.
Transactions under the stock option plans are summarized below. At March 31,
2008, a total of 475,410 options were outstanding under these plans.
Employee Stock Plans
--------------------------------
Weighted
Options Average
Exercise Price
--------------- ----------------
Outstanding at 12/31/07 617,910 $ 0.74
Granted --- ---
Exercised (52,500) 0.51
Forfeited (90,000) 2.00
--------------- ----------------
Outstanding at 3/31/08 475,410 $ 0.53
=============== ================
The fair value of options issued during 2008 was approximately $0.
Aggregate intrinsic value represents the value of the Company's closing stock
price on the last trading day of the period in excess of the exercise price
multiplied by the number of options outstanding or exercisable. The total
intrinsic value of options exercised during 2008 was $35,263. Total unrecognized
stock-based compensation expense related to non-vested stock options was
approximately $42,965 as of March 31, 2008, related to approximately 88,500
shares with a per share weighted average fair value of $0.48. We anticipate this
expense to be recognized over a weighted average period of approximately 0.75
years.
The following table summarizes information about options outstanding at March
31, 2008 under the Employee Stock Plan adjusted for the 2006 stock dividend:
Options Outstanding Options Exercisable
------------------------------------------ ---------------------------
Weighted Avg.
Remaining Weighted Avg.
Range of Number Contractual Weighted Avg. Number Exercise
Exercise Prices Outstanding Life Exercise Price Exercisable Price
---------------- ------------ -------------- -------------- ------------- -------------
2008: $1.26 - 1.87 16,500 8.1 years $1.32 16,500 $1.32
$0.00 - $1.25 458,910 6.5 years $0.50 370,410 $0.50
475,410 6.6 years $0.53 386,910 $0.54
Aggregate
intrinsic value $309,941 $250,646
The weighted average remaining contractual life of options exercisable as of
March 31, 2008 was 6.5 years.
10
Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
March 31, 2008
--------------------------------------------------------------------------------
NOTE 8 - 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 three months ended March 31, 2008
and 2007 are as follows:
2008 2007
------------- ------------
Net income (loss) $ (341,495) $ 358,140
Other comprehensive income
Net Unrealized gain --- 33
------------- ------------
Total comprehensive income
(loss) $ (341,495) $ 358,173
============= ============
--------------------------------------------------------------------------------
NOTE 9 - INCOME TAXES.
--------------------------------------------------------------------------------
The Company recorded approximately $22,000 and $20,000 of state income tax
expense, respectively, for the three months ended March 31, 2008 and 2007. 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 $6,700,000 at December 31, 2007, and begin expiring in the
year 2015.
The Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 (FIN
48) on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in an enterprise's financial statements in accordance
with FASB Statement No. 109, Accounting for Income Taxes, by prescribing a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. If a tax position is more likely than not to be sustained upon
examination, then an enterprise would be required to recognize in its financial
statements the largest amount of benefit that is greater than 50% likely of
being realized upon ultimate settlement. As a result of our implementation of
FIN 48 at the time of adoption and as of December 31, 2007, the Company did not
recognize a liability for uncertain tax positions. We do not expect our
unrecognized tax benefits to change significantly over the next twelve months.
The tax years 2003 through 2007 remain open to examination by the taxing
jurisdictions in which we file income tax returns.
--------------------------------------------------------------------------------
NOTE 10 - RELATED PARTY TRANSACTIONS.
--------------------------------------------------------------------------------
In 2002, the President was awarded a $300,000 bonus. In August 2007, the Board
of Directors approved and payment was made to the President and CEO for the
accrued bonus and accrued interest thereon. The Company accrued $5,063 in
interest in 2007 on this liability.
During 2006, the Company renewed the employment agreement with its President and
CEO; in accordance with this agreement, the Company accrued $6,000 and $6,000 of
deferred compensation in the three months ended March 31, 2008 and 2007,
respectively.
11
Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
March 31, 2008
--------------------------------------------------------------------------------
NOTE 11 - 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.
The Company is obligated to make payments over approximately the next three
years in settlement of litigation that was concluded in prior periods. At March
31, 2008, the carrying value of these obligations was $539,400. The Company is
current in all its settlement payment obligations.
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.
In this case, Littlefield initially sought recovery from Philip Furtney
["Furtney"] for fraud, negligent misrepresentations, and breach of guaranty.
This litigation arises from the 1995 acquisition of three Florida bingo centers
by a predecessor, American Bingo & Gaming Corporation, from two corporations
controlled by Furtney - Pondella Hall for Hire, Inc., and 800438 Ontario.
Several months after the acquisition of the three centers, the Florida Attorney
General obtained an indictment for alleged racketeering against two American
Bingo subsidiaries that operated two of the centers and brought a civil
proceeding against the same two subsidiaries and American Bingo based upon the
same allegations. The indictment and civil litigation were the result of an
investigation that had been ongoing for over one year prior to the acquisition
of the centers. Furtney was aware of the investigation and its serious nature,
but did not disclose the investigation to American Bingo. In fact, the
agreements related to the sale specifically and falsely stated that there were
not any ongoing governmental investigations. American Bingo settled the
litigation brought by the Florida Attorney General and sold its Florida centers
as a condition of the settlement. The resolution of this long pending matter was
substantially delayed when Furtney, a citizen of Canada and part time resident
of Mexico would not permit his United States attorney to accept service of the
Complaint. Littlefield was successful in finally serving Furtney when he was in
the United States in 2005 to attend related litigation.
Furtney passed away in September 2007, several months before the scheduled trial
date. In the event a defendant dies following the commencement of litigation,
the Florida Rules of Civil Procedure provides that a plaintiff may substitute
the defendant's estate as the defendant and continue to pursue the claim to
judgment. Furtney's estate has now been substituted as the defendant and
Littlefield intends to vigorously pursue the claim for all damages related to
the purchase of the Florida centers from Furtney's estate, including all sums
paid in the acquisition, all costs incurred by American Bingo in the litigation
with the state of Florida, and judgments Littlefield was required to pay to
Pondella and 800438 Ontario as a result of related litigation. The Company is
awaiting a trial date.
South Carolina Department of Revenue v. Littlefield Corporation, Midlands
Promotions, Inc., Low Country Promotions, Inc., and Gamecock Promotions, Inc.,
05- ALJ-17-0413-CC
The South Carolina Department of Revenue issued an administrative bingo
violation against the above referenced parties alleging that the Company has an
unlawful number of bingo promoter licenses. The Department of Revenue seeks to
revoke all bingo promoter licenses held by the Company's South Carolina
subsidiaries and seeks a $5,000 penalty. The Department of Revenue has moved to
pierce the corporate veil of the Company to thereby attribute the promoter
licenses to the Company. The Department of Revenue's theory is that the three
South Carolina subsidiaries are invalid corporations and that as a matter of law
the Company is the holder of the 12 promoter licenses at issue. South Carolina
law provides that a promoter may only have 5 licenses. The Company moved for
summary judgment and it was denied. However, certain originally named charities
were dismissed from the lawsuit. The case has been stayed until co-counsel
returns from active military duty, which is expected to occur around August of
2008. The Company is vigorously defending itself and asserts that it is not the
holder of the promoter licenses but rather that its lawfully formed subsidiaries
are separate corporations that each holds a lawful number of the promoter
licenses.
12
Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
March 31, 2008
--------------------------------------------------------------------------------
NOTE 11 - COMMITMENTS AND CONTINGENCIES.
--------------------------------------------------------------------------------
Texas Lottery Commission Notice of Opportunity to Show Compliance.
Texas Charities, Inc., a subsidiary of the Company and licensed by the Texas
Lottery Commission ("Commission") as a commercial lessor pursuant to the Bingo
Enabling Act, received a Notice of Opportunity to Show Compliance ("Notice")
from the Commission's Charitable Bingo Division ("Division") dated July 27,
2007. The Notice indicated that the Division intended to initiate administrative
disciplinary action against Texas Charities, Inc. because it believed that Texas
Charities, Inc. violated the Act by improperly extending credit. On January 16,
2008, the Division amended the Notice to indicate the Division also had reason
to believe that Texas Charities, Inc., violated the act by including a provision
in its commercial lease agreement that required the lessee to sell certain bingo
equipment to third parties under certain circumstances. Texas Charities, Inc.
disputed the Division's interpretation of the Act and, on March 27, 2008, the
Division sent two separate letters (one to Texas Charities, Inc. in connection
with the "extension of credit issue" and one to Ambler Bingo, Inc. in connection
with the "bingo equipment" issue) indicating that no further administrative
action would be taken.
Cause No. 24140-B; Hamby Volunteer Fire Department, Trustee of the Ambler
Charities Unit Trust v. Littlefield Corporation, d/b/a Ambler Bingo, Inc.; 104th
Judicial District Court of Taylor County, Texas.
Plaintiff filed suit against the Company alleging breach of contract and
violation of the Bingo Enabling Act ("Act"). The Company filed an answer denying
all of the Plaintiff's claims. Plaintiff's and the Company reached a
confidential settlement agreement. However, the Plaintiffs failed to perform
under the terms and conditions of the settlement agreement and the Company filed
a complaint with the American Arbitration Association to enforce the settlement
agreement. This matter has been fully resolved. The lawsuit and the arbitration
have both been dismissed.
Cause No. 8285-D; West Texas Bingo, Inc v. Rodger Hiatt, in the 350th Judicial
District Court of Taylor County, Texas.
The Company filed suit against the Defendant alleging the Defendant interfered
with the Company's bingo operations and/or business operations at Super Bingo,
which is located in Abilene, Texas. The Defendant asserted counterclaims against
the Company alleging that the Company's claims were harassing and constituted
intentional infliction of emotional distress. The lawsuit is ongoing and the
parties are currently engaged in discovery. The matter has not been set for
trial, nor have the parties scheduled a pre-trial mediation.
Cause No.24, 182-B; West Texas Bingo, Inc. v. Janie Wall, in the 104th Judicial
District Court of Taylor County, Texas.
The Company filed suit against the Defendant alleging the Defendant interfered
with the Company's bingo operations and/or business operations at Super Bingo,
which is located in Abilene, Texas. The Defendant asserted counterclaims against
the Company alleging that the Company's claims were harassing and constituted
intentional infliction of emotional distress. The lawsuit is ongoing and the
parties are currently engaged in discovery. The matter has not been set for
trial, nor have the parties scheduled a pre-trial mediation.
--------------------------------------------------------------------------------
NOTE 12 - 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 accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies except that depreciation and amortization are allocated to
each segment from functional department totals based on certain assumptions
which include, among other things, revenues. Also, the Company's CODM does not
view segment results below gross profit (loss), therefore, general and
administrative expenses, net interest income, other income, and the provision
for income taxes are not broken out by segment below.
13
Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
March 31, 2008
The entertainment segment encompasses charitable bingo hall operations in Texas,
Alabama, South Carolina and Florida. The hospitality segment includes income
from party and tent rentals, catering services and event planning fees. These
segments were identified based on the different nature of the services and
legislative monitoring and, in general, the type of customers for those
services.
A summary of the segment financial information reported to the CODM for the
three months ended March 31, 2008 and 2007 is as follows:
March 31, 2008
--------------
Entertainment Hospitality Adjustment Consolidated
------------- ------------- -------------- --------------
Revenue $ 2,250,000 $ 854,000 $ 20,000 $ 3,124,000
Depreciation and
Amortization 132,000 69,000 32,000 233,000
Segment profit (loss) 692,000 (230,000) (803,000) (341,000)
Segment Assets 29,137,000 1,187,000 (8,011,000) 22,313,000
March 31, 2007
--------------
Entertainment Hospitality Adjustment Consolidated
------------- ------------- -------------- --------------
Revenue $ 2,334,000 $ 1,143,000 $ 12,000 $ 3,489,000
Depreciation and
Amortization 98,000 58,000 29,000 185,000
Segment profit (loss) 1,244,000 (141,000) (745,000) 358,000
Segment Assets 25,793,000 1,360,000 (10,653,000) 16,500,000
The Adjustments generally represent other corporate expenses and revenue, other
income, depreciation and amortization related to corporate assets, corporate
gains and losses on disposition of assets, inter-company eliminations and
corporate capital expenditures to reconcile segment balances to consolidated
balances.
A summary of items included in the "Adjustment" follows:
2008 2007
------------- -------------
Gross profit - other revenue $ 20,000 $ 12,000
General and administrative expense (735,000) (622,000)
Other income and expenses (66,000) (115,000)
Provision for income taxes (22,000) (20,000)
------------- -------------
Total "Adjustment" $ (803,000) $ (745,000)
============= =============
--------------------------------------------------------------------------------
NOTE 13 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS.
--------------------------------------------------------------------------------
Recent Issued Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation ("FIN") 48, Accounting for Uncertainty in Income Taxes - an
interpretation of Statement of Financial Accounting Standards ("SFAS") 109. This
interpretation clarifies the accounting for uncertainty in income taxes
recognized in an entity's financial statements in accordance with SFAS 109,
Accounting for Income Taxes . It prescribes a recognition threshold and
measurement attribute for financial statement disclosure of tax positions taken
or expected to be taken on a tax return. This interpretation was effective for
fiscal years beginning after December 15, 2006. We adopted FIN 48 on January 1,
2007, as required. The adoption of FIN 48 did not have a significant impact on
our financial position or results of operations.
14
Littlefield Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
March 31, 2008
In September 2006, the FASB issued SFAS 157, Fair Value Measurements . This
standard defines fair value, establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America, and
expands disclosure about fair value measurements. This pronouncement applies
under other accounting standards that require or permit fair value measurements.
Accordingly, this statement does not require any new fair value measurement.
This statement is effective for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. We adopted SFAS 157 on January 1,
2008, as required. The adoption of SFAS 157 did not have a significant impact on
our financial position or results of operations.
In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities - including an amendment of FASB Statement 115.
This standard permits an entity to measure many financial instruments and
certain other assets and liabilities at fair value on an
instrument-by-instrument basis. This statement is effective for fiscal years
beginning after November 15, 2007. We adopted SFAS 159 on January 1, 2008, as
required. The adoption of SFAS 159 did not have a significant impact on our
financial position or results of operations.
In December 2007, the FASB issued SFAS 141(R), Business Combinations--a
replacement of FASB Statement No. 141, which significantly changes the
principles and requirements for how the acquirer of a business recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree. The
statement also provides guidance for recognizing and measuring the goodwill
acquired in the business combination and determines what information to disclose
to enable users of the financial statements to evaluate the nature and financial
effects of the business combination. This statement is effective prospectively,
except for certain retrospective adjustments to deferred tax balances, for
fiscal years beginning after December 15, 2008. We are currently evaluating the
requirements of SFAS 141(R) and have not yet determined the impact on our
consolidated financial statements.
--------------------------------------------------------------------------------
NOTE 14 - SUBSEQUENT EVENTS.
--------------------------------------------------------------------------------
On April 15, 2008, the Company sold its Word of Mouth custom catering business
unit reflecting the Company's focus on its charitable bingo business in Texas,
South Carolina, Alabama and Florida. A final determination of the expected gain
on sale will be determined within ninety days of the closing in accordance with
the terms of the asset purchase agreement. Assets purchased, excluding goodwill,
were approximately $125,000 consisting mainly of catering equipment and
inventory.
15
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
First quarter 2008 results were impacted by the effects of a broad program of
renovations, re-openings and start-ups of new halls affecting eight locations
within the Company's portfolio of 32 bingo centers including Pensacola, Florida;
San Angelo, Abilene, Odessa and Corpus Christi, Texas. The Company also
announced plans to open additional halls in McAllen and El Paso, Texas later in
the year. The San Angelo bingo hall is open and operating while the Corpus
Christi bingo hall will open in early May.
The Q1 2008 earnings include the effect of approximately $573,000 of notable
items: $416,000 from the effects of renovations and openings at several halls in
Texas, and $143,000 of legal expenses and $14,000 for non cash expenses for
compensation expense related to stock options. The legal expenses were mainly
from our expansion plans and operations in South Carolina, Texas legal items,
our completed Florida acquisition and our litigation with Furtney seeking
recovery of prior settlements and other damages.
The Q1 2007 earnings include approximately $97,000 of notable items: $83,000
from legal expenses related to South Carolina, Texas and our attempts to expand
into Arkansas, and $14,000 for non cash expenses for compensation expense
related to stock options.
Revenues
--------
The following table sets forth the Company's revenues by segment for the three
months ended March 31, 2008 and 2007:
2008 2007 Change % Change
-------------- ------------ ------------- ------------
Total Revenues $ 3,124,000 $ 3,489,000 $ (365,000) (10%)
Entertainment 2,250,000 2,334,000 (84,000) (4%)
Texas 1,260,000 1,379,000 (119,000) (9%)
South Carolina 510,000 499,000 11,000 2%
Alabama / Florida 480,000 456,000 24,000 5%
Hospitality 854,000 1,143,000 (289,000) (25%)
Other $ 20,000 $ 12,000 $ 8,000 NM
During the first three months of 2008, total revenues for the Company decreased
10% from 2007 with both Entertainment and Hospitality segments contributing to
the decline in revenue. Entertainment revenue decreased 4% with Texas being the
most significant contributor mainly as a result of the effect of hall
renovations and re-openings. Absent the effects of the strategic investments to
strengthen its long-term position in certain markets by renovating then
reopening and merging certain halls in Texas, the underlying performance of the
Entertainment portfolio continued an upward trend with revenue increasing
approximately three percent. The Entertainment segment accounted for 72% of
total revenues compared with 67% of total revenues in 2007. By state,
Entertainment revenues for Texas, South Carolina and Alabama were 56%, 23% and
21% of total Entertainment revenue respectively compared to 59%, 21% and 20% in
2007. Hospitality revenue decreased 25% from the prior year reflecting lower
event activity. Hospitality accounted for 27% of total revenues in 2008,
compared to 33% of total revenues in 2007. Other revenue includes other
ancillary services and miscellaneous revenue not reported as segment revenue.
Costs and Expenses
------------------
Cost of services increased 11% over the comparable three-month prior year period
mainly as a result of the costs associated with renovations, re-openings and the
opening of new bingo centers. This, in conjunction with lower revenues, resulted
in a decline of gross profit percent (gross profit as a percent of sales) to
15.4% from 31.9% in 2007. The table below summarizes gross profit by segment for
the three months ended March 31, 2008 and 2007:
2008 2007 Change % Change
------------ -------------- ------------ -------------
Total Gross Profit $ 482,000 $ 1,115,000 $ (633,000) (57%)
Entertainment 692,000 1,244,000 (552,000) (44%)
Hospitality (230,000) (141,000) (89,000) NM
Other $ 20,000 $ 12,000 $ (8,000) NM
The decrease in gross profit was mainly attributed to the effects of renovations
and openings at several halls in Texas ($416,000), higher Texas administrative
expenses added to manage the new bingo centers and renovation activity and lower
hospitality revenue.
Direct salaries and other compensation were 3% below the prior year. This
reduction represented reduced staffing costs in the Hospitality segment in
response to lower Hospitality revenues and were partially offset by additions in
Texas to manage the new hall and renovation activity.
16
Rent and utilities in 2008 were up approximately 6% over 2007 which largely
reflected the addition of our new hall in Florida. In 2008 and 2007, we did not
recognize lease costs on a straight-line basis as provided in SFAS 13, paragraph
15 and FTB 85-3. Instead, lease costs were recognized based on payments made or
accrued during each month. If the Company had recognized lease expense on a
straight-line basis in 2008 and 2007, total lease costs would not have
materially changed the Company's financial results. In general, the Company
enters into long term leases underlying its operations. At the same time, the
Company generally enters into agreements which are renewed annually with its
customers. This permits the Company to adjust its customer agreements in
response to general price increases and limits the effect of lease escalation
clauses. Generally, the Company's leases require payments of rent and a pro-rata
share of real estate maintenance, taxes and insurance.
Other direct operating costs in 2008 were up 26% over the prior year, mainly due
to costs such as advertizing, promotions and development expenses of the new
halls and re-opening after major renovations. The provision for doubtful
accounts was reduced as a result of the payment of a settlement reached with
certain customers. License expense was down approximately $3,000.
Depreciation and amortization expense totaled approximately $233,000 ($201,000
Cost of Services plus $32,000 G&A) in 2008 versus $185,000 in the prior year.
General and administrative expenses, excluding related depreciation expense, the
noted legal fees and stock-based compensation totaled approximately $547,000 in
2008, compared to approximately $496,000 in 2007, an increase of about $51,000.
The increase mainly related to planned staff, compensation and travel related
increases.
Other income and expense was an expense of approximately $66,000 for 2008,
compared to approximately $114,000 in 2007. The difference mainly stems from
lower interest expense from the refinancing of legal settlements and certain
notes payable during 2007.
Our income tax expense for 2008 was approximately $22,000 compared to $20,000 in
2007, all of which is related to the expected effective tax rate for state
income taxes. As of December 31, 2007, the Company had a net operating loss
available for carryover on its federal income taxes of approximately $6,700,000.
Net Income
----------
During the first three months of 2008, we realized a net loss of 341,000;
$(0.03) per basic share and $(0.03) per fully diluted share. Net income for the
first three months of 2007 was $358,000; $0.03 per basic share and $0.03 per
fully diluted share. The weighted average number of basic Common Stock shares
outstanding totaled 11,738,662 in 2008 compared to 10,955,719 in 2007. The
increase in shares outstanding mainly represents the sale of 5,190,568 shares of
common stock on March 27, 2008.
Adjusted for the noted items above, the adjusted net income during the first
three months of 2008 was $231,000 and basic earnings per share were $0.02 per
share in 2008 versus an adjusted net income of $455,000 and basic earnings per
share of $0.04 last year.
Liquidity and Capital Resources
-------------------------------
Cash and cash equivalents at March 31, 2008, totaled approximately $7,720,000
and represented 35% of total assets of approximately $22,313,000. Current assets
totaled approximately $8,646,000. Current liabilities totaled $1,626,000.
Working capital was approximately $7,020,000 with a current ratio of 5.3 to 1
compared to approximately 1.8 to 1 in December 2007.
Cash used by operating activities for the three months ended March 31, 2008
totaled approximately $7,000 compared to cash provided of $405,000 during 2007.
Cash flows from operating activities in 2008 were decreased by a net loss of
approximately $341,000 and provided by non-cash depreciation expense of
approximately $233,000, stock based compensation of approximately $14,000 and by
other net changes in asset and liability accounts of $87,000.
Net cash used in investing activities totaled approximately $1,164,000 for
capital expenditures mainly for bingo hall renovations, leasehold improvements,
the acquisition of the Florida hall and additional licenses during the three
months ended March 31, 2008. This compared to net cash used in investing
activities of approximately $126,000 in 2007 for the purchase of capital assets.
Cash provided by financing activities in 2008 totaled approximately $6,926,000,
compared to net cash provided by financing activities in 2007 of approximately
$369,000. During the first three months of 2008, approximately $7,000,000 of
cash proceeds were obtained through the sale of common stock, approximately
$27,000 was provided by exercised options and $101,000 was used for the payment
of notes payable and legal settlement obligations. In 2007, approximately
$476,000 of financing was obtained from the sale of common stock and $107,000
was used for the payment of notes payable and legal settlements.
17
At March 31, 2008, we had approximately $22,313,000 in total assets with total
liabilities of approximately $5,385,000 and approximately $16,928,000 of
shareholders' equity. Total assets include approximately $7,720,000 in cash,
$614,000 of net accounts receivable, other current assets of $312,000,
$7,482,000 of net property and equipment, $5,980,000 of intangible assets, and
$205,000 of other assets. Total liabilities primarily consist of accounts
payable of approximately $384,000 and notes payable obligations of approximately
$3,594,000, legal settlement obligations of $539,000 and accrued and
related-party liabilities of $868,000.
In 2008, we plan to continue to use our cash generated from operations to make
leasehold improvements and renovations in our bingo operations. We also plan to
use advantageous combinations of bank financing, seller financing, treasury
stock, and cash on new bingo hall acquisitions when favorable terms can be
obtained.
Financial Risk Management
Off-Balance Sheet Arrangements. We have no off-balance sheet debt.
Market Risk. In the normal course of business, we employ established procedures
to manage our exposure to changes in the market value of our investments. There
were no significant investments in marketable securities at March 31, 2008 or
2007.
Recently Issued Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation ("FIN") 48, Accounting for Uncertainty in Income Taxes - an
interpretation of Statement of Financial Accounting Standards ("SFAS") 109. This
interpretation clarifies the accounting for uncertainty in income taxes
recognized in an entity's financial statements in accordance with SFAS 109,
Accounting for Income Taxes . It prescribes a recognition threshold and
measurement attribute for financial statement disclosure of tax positions taken
or expected to be taken on a tax return. This interpretation was effective for
fiscal years beginning after December 15, 2006. We adopted FIN 48 on January 1,
2007, as required. The adoption of FIN 48 did not have a significant impact on
our financial position or results of operations.
In September 2006, the FASB issued SFAS 157, Fair Value Measurements . This
standard defines fair value, establishes a framework for measuring fair value in
accounting principles generally accepted in the United States of America, and
expands disclosure about fair value measurements. This pronouncement applies
under other accounting standards that require or permit fair value measurements.
Accordingly, this statement does not require any new fair value measurement.
This statement is effective for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. We adopted SFAS 157 on January 1,
2008, as required. The adoption of SFAS 157 did not have a significant impact on
our financial position or results of operations.
In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities - including an amendment of FASB Statement 115.
This standard permits an entity to measure many financial instruments and
certain other assets and liabilities at fair value on an
instrument-by-instrument basis. This statement is effective for fiscal years
beginning after November 15, 2007. We adopted SFAS 159 on January 1, 2008, as
required. The adoption of SFAS 159 did not have a significant impact on our
financial position or results of operations.
In December 2007, the FASB issued SFAS 141(R), Business Combinations--a
replacement of FASB Statement No. 141, which significantly changes the
principles and requirements for how the acquirer of a business recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree. The
statement also provides guidance for recognizing and measuring the goodwill
acquired in the business combination and determines what information to disclose
to enable users of the financial statements to evaluate the nature and financial
effects of the business combination. This statement is effective prospectively,
except for certain retrospective adjustments to deferred tax balances, for
fiscal years beginning after December 15, 2008. We are currently evaluating the
requirements of SFAS 141(R) and have not yet determined the impact on our
consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Response to this item is included in "Item 2 - Management's Discussion and
Analysis of Financial Conditions and Results of Operations - Market Risk" above.
18
Item 4. Controls and Procedures
Evaluation of Disclosure Controls
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.
Based upon their evaluation, our management including the Chief Executive
Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures (as defined in Rule 13a-15(e) or 15 d - 15(e) under the
Securities Exchange Act) are effective, as of the end of the period covered by
this report on Form 10-Q, 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.
There have been no changes in our internal control over financial reporting
during the quarter ended March 31, 2008, that have materially affected or are
reasonably likely to materially affect, our internal control over financial
reporting.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our disclosure
controls or our internal controls over financial reporting will prevent all
error and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, but not absolute, assurance that the
objectives of a control system are met. Further, any control system reflects
limitations on resources, and the benefits of a control system must be
considered relative to its costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within Littlefield
Corporation have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people, or
by management override of a control. A design of a control system is also based
upon certain assumptions about potential future conditions; over time, controls
may become inadequate because of changes in conditions, or the degree of
compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and may not be detected.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of material pending legal proceedings, see Note 11 to the
unaudited Consolidated Financial Statements included in Part I hereof, which
Note 11 is incorporated herein by reference.
Item 6. Exhibits
Exhibit Description
3.1 Certificate of Incorporation of the Company dated September 8, 1994, as
amended October 17, 1994, and further amended July 31, 1997 and August
13, 1998, and September 22, 1999 (incorporated by reference to Exhibit
3.1 of the Quarterly Report on Form 10-QSB filed by the Company on
November 15, 1999, for the quarter ended September 30, 1999).
3.2 Amended and Restated Bylaws of the Company (incorporated by reference
to Exhibit 3.2 of the Quarterly Report on Form 10-QSB filed by the
Company on November 15, 1999, for the quarter ended September 30,
1999).
10.1* 2002 Stock Option Plan (incorporated by reference to Exhibit of the
Definitive Proxy Statement Schedule 14A, filed with the SEC on March
22, 2002).
19
10.2* 2002 Employee Stock Purchase Plan (incorporated by reference to Exhibit
of the Definitive Proxy Statement Schedule 14A, filed with the SEC on
March 22, 2002).
31.1 Rule 31a-14(a) / 15d-14(a) Certifications
32.1 Section 1350 Certifications
* Denotes a management contract or compensatory plan or arrangement.
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
May 14, 2008
By:
/s/ JEFFREY L MINCH
-------------------
Jeffrey L. Minch
President and Chief Executive Officer
/s/ RICHARD S. CHILINSKI
-------------------------
Richard S. Chilinski
Chief Financial Officer
20