**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-KSB**




ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934


FOR
      THE
      FISCAL YEAR ENDED March 31, 2007





**LEFT
      BEHIND GAMES INC.**


(Exact
      name of registrant as specified in its charter)




**Washington**
            
            **000-50603**
            
            **91-0745418**(State
                or other jurisdiction
            
            (Commission
                File Number)
            
            (IRS
                Employerof
                Incorporation)
            
            
            
            Identification
                Number)**25060
                Hancock Avenue, Suite 103 Box 110****Murrieta,
                California 92562**(Address
                of principal executive offices)**(951)
                894-6597**(Registrant’s
                Telephone Number)





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.  Yes o   No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Act.    Yes  o   No x





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 filing
      requirements for the past 90
      days.    Yes x No o





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of the Registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K.   o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act.) Yes o No x





The
      aggregate market value of the common stock held by non-affiliates of the
      Registrant as of July 12, 2007, computed by reference to the closing sale price
      of the common stock on the Over the Counter Bulletin Board on July 12, 2007,
      was
      approximately $10.3 million. Shares of common stock held by each executive
      officer and director and by each person who owns 5% or more of the outstanding
      common stock have been excluded in that such persons may be deemed to be
      affiliates. The determination of affiliate status is not necessarily a
      conclusive determination for other purposes.





The
      number of outstanding shares of the registrant’s Common Stock, $0.001 par value,
      as of July 12, 2007 was 46,814,847 shares of common stock.





Securities
      registered under Section 12 (b) of the Exchange Act:  None





Securities
      registered under Section 12 (g) of the Exchange Act: Common Stock, $0.001 par
      value.





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act: o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of the Form 10-KSB or any
      amendment to this Form 10-KSB. o





State
      issuer’s revenues for its most recent fiscal year: $768,237





DOCUMENTS
      INCORPORATED BY REFERENCE -- Not applicable





Transitional
      Small Business Disclosure Format: Yes o No x














**TABLE
      OF CONTENTS**





Page**PART
                I**Item
                1.
            Description
                of Business
            4Item
                2.
            Description
                of Property
            15Item
                3.
            Legal
                Proceedings
            15Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            15**PART
                II**Item
                5.
            Market
                for Common Equity and Related Stockholder Matters
            15Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operation
            18Item
                7.
            Financial
                Statements
            23Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            23Item
                8A.
            Controls
                and Procedures.
            24**PART
                III**Item
                9.
            Directors,
                Executive Officers, Promoters, Control Persons andCorporate
                Governance;Compliance with Section 16(a) of the Exchange Act
            24Item
                10.
            Executive
                Compensation
            25Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Managementand
                Related Stockholder Matters.
            28Item
                12.
            Certain
                Relationships and Related Transactionsand
                Director Independence.
            29Item
                13.
            Exhibits
            30Item
                14
            Principal
                Accountant Fees and Services
            31**SIGNATURES**
            32Index
                to Consolidated Financial Statements
            F-1





2





**CAUTIONARY
      STATEMENT REGARDING**


**FORWARD-LOOKING
      STATEMENTS**





This
      annual report on Form 10-KSB and other reports that we file with the SEC contain
      statements that are considered forward-looking statements. Forward-looking
      statements give our current expectations, plans, objectives, assumptions or
      forecasts of future events. All statements other than statements of current
      or
      historical fact contained in this annual report, including statements regarding
      our future financial position, business strategy, budgets, projected costs
      and
      plans and objectives of management for future operations, are forward-looking
      statements. In some cases, you can identify forward -looking statements by
      terminology such as “anticipate,” “estimate,” “plans,” “potential,” “projects,”
“ongoing,” “expects,” “management believes,” “we believe,” “we intend,” and
      similar expressions. These statements are based on our current plans and are
      subject to risks and uncertainties, and as such our actual future activities
      and
      results of operations may be materially different from those set forth in the
      forward looking statements. Any or all of the forward-looking statements in
      this
      annual report may turn out to be inaccurate and as such, you should not place
      undue reliance on these forward-looking statements. We have based these
      forward-looking statements largely on its current expectations and projections
      about future events and financial trends that it believes may affect its
      financial condition, results of operations, business strategy and financial
      needs. The forward-looking statements can be affected by inaccurate assumptions
      or by known or unknown risks, uncertainties and assumptions due to a number
      of
      factors, including:




·
            continued
                development of our technology;·
            dependence
                on key personnel;





·
            competitive
                factors;·
            the
                operation of our business; and





·
            general
                economic conditions.





These
      forward-looking statements speak only as of the date on which they are made,
      and
      except to the extent required by federal securities laws, we undertake no
      obligation to update any forward-looking statements to reflect events or
      circumstances after the date on which the statement is made or to reflect the
      occurrence of unanticipated events. In addition, we cannot assess the impact
      of
      each factor on our business or the extent to which any factor, or combination
      of
      factors, may cause actual results to differ materially from those contained
      in
      any forward-looking statements. All subsequent written and oral forward-looking
      statements attributable to us or persons acting on its behalf are expressly
      qualified in their entirety by the cautionary statements contained in this
      annual report.


3


**PART
      I**





**ITEM
      1. DESCRIPTION OF BUSINESS**





**General**





Left
      Behind Games Inc., a Washington corporation, formerly known as Bonanza Gold,
      Inc., doing business through its subsidiary Left Behind Games Inc., a Delaware
      corporation is in the business of developing and publishing video game products
      based upon the popular *Left
      Behind* series
      of novels. Pursuant to a share exchange agreement closed on February 7, 2006,
      we
      became a subsidiary of Left Behind Games Inc. Washington. As a result of the
      share exchange agreement, our shareholders took majority control of Left Behind
      Games Inc. Washington and our management became the management of Left Behind
      Games Inc. Washington (collectively, “we”, “our” or “LBG”)..





We
      are an
      early stage company founded to develop and publish video game products based
      upon the popular *Left
      Behind* series
      of novels. We have the exclusive world-wide rights to the *Left
      Behind* book
      series and brand, for the purpose of making any form of electronic games, which
      includes video games. *Left
      Behind* novels
      and products are based upon fictional storylines focused on events at the end
      of
      the world, including the ultimate battles of good against evil, which are very
      action oriented and supremely suitable for an engaging series of electronic
      games. According to the book publisher, Tyndale House Publishers, *Left
      Behind’s* series
      of books has sold more than 63 million copies. As a result, *Left
      Behind* branded
      products have generated more than $500 million at retail for the *Left
      Behind* book
      series. According to a Barna Research study, *Left
      Behind* has also
      become a recognized brand name by more than 1/3 of Americans. Our management
      believes that *Left
      Behind* products
      have experienced financial success, including the novels, children's books,
      graphic novels (comic books), movies, and music. Our interest in the *Left
      Behind* brand is
      limited to our sublicense to make video games. We have no interest in, nor
      do we
      profit from any other *Left
      Behind* branded
      products.





Our
      rights to use the *Left
      Behind* brand to
      make electronic games is based solely on our sublicense with White Beacon which
      entitles us to all of its rights and obligations under its license with the
      publisher of the *Left
      Behind* book
      series. White Beacon’s exclusive worldwide license from the publisher of the *Left
      Behind* book
      series grants it, and us through our sublicense, the rights to develop,
      manufacture, market and distribute video game products based on the *Left
      Behind* series.





We
      have
      assembled a team of individuals experienced in the video game industry to
      develop and market video games based upon the *Left
      Behind* series
      that offers a challenging and positive oriented alternative to video games
      with
      gratuitous sex and violence currently marketed. Our game(s) feature spiritual
      weapons such as “prayer” and “worship” which can overcome the fighting power of
“guns”.





**Anticipated
      Name Change.** As
      a **** result
      our continuing growth as a potential distributor of other published products
      into the Christian Booksellers Association (“CBA”) and inspirational
      marketplaces, we anticipate that we will change our name, subject to shareholder
      vote at a future shareholder meeting.




**Recent
        Developments**
 
 **Background**
 
 In
        November of 2006, we released our first product; LEFT BEHIND: Eternal Forces.
        We
        successfully gained entry into more than 10,000 retail locations, including
        Target, Best Buy, GameStop, EB Games, select Wal-Marts, Circuit City, Comp
        USA
        and numerous others.
 
 Because
        our distribution channel failed to efficiently deliver our product to the
        Christian and inspirational marketplace last year, our product was not available
        until the week of Christmas, which we believe significantly reduced our
        Christmas sales in this market. Due to this experience, we made the decision
        to
        build our own direct-to-store distribution channel for the Christian and
        inspirational marketplaces. In a short time, we already have direct-to-store
        account relationships with more than 400 stores; over 1000 if large chains
        are
        included in the total. Additionally, Hallmark store owners have expressed
        interest in carrying our product. At our current pace of growth, we believe
        that
        our company will have a significant direct-to-store distribution channel
        by
        Christmas of 2007.
 
 4
 As
        a
        result of last year’s public relations experiences where the media
        misrepresented the content of our game, we are in the process of developing
        marketing strategies to inform the public about the content or our games.
        This
        includes providing information about the game’s promotion of values of
        fellowship and reconciliation.
 
 Although
        we started as a one product company, we’ve anticipated our need to expand our
        product line to include products for everyone in the family. Our recent
        publishing agreement for the Charlie Church Mouse line of products now includes
        something for those in pre-school, kindergarten and elementary school. And
        we
        are actively seeking to acquire small inspirational game businesses to enhance
        our product offerings.
 
 We
        believe that successfully marketing products that are inspirational in nature
        must include development of a grass-roots campaign supported by Churches
        and
        Ministries worldwide. As such, we have held five church sponsored outreach
        events called “Eternal Forces Mondays.” These events represent opportunities for
        churches to send their youth to local LAN Centers and for youth pastors to
        invite the unchurched to an event outside of church. As a result of the success
        of these events, we are launching a nationwide campaign to allow churches
        to
        utilize our games for their fund-raising purposes.
 
 **Current
        Retail Environment and Emerging Distribution Methods**
  Increasingly,
        retailers have limited shelf space and promotional resources, and competition
        is
        intense among an increasing number of newly introduced entertainment software
        titles and hardware for adequate levels of shelf space and promotional support.
        Competition for retail shelf space is expected to increase, which may require
        us
        to increase our marketing expenditures to maintain current sales levels of
        our
        titles. Competitors with more extensive product lines and popular titles
        may
        have greater bargaining power with retailers. Accordingly, we may not be
        able to
        achieve the levels of support and shelf space that such competitors receive.
 
 We
        are
        actively investigating emerging distribution platforms, including online
        digital
        and wireless downloads that may represent sources of additional revenue for
        us
        beyond the traditional retail outlets and the CBA (inspirational)
        marketplace.
 
 In
        addition, we derive revenue from in-game advertising consisting primarily
        of
        fixed product placement. We are developing and expanding on dynamic ad serving
        technology and will continue to focus on attracting third parties to advertise
        in our video games. Ideally, organizations already selling ad space for those
        interested in the demographic make-up of *LEFT
        BEHIND* readers
        and gamers, will be engaged to sell ad space which will be implemented by
        Double
        Fusion, our in-game advertising technology partner.
 
 5
 **Pursue
        Growing Trends of Digital Content Creation and
        Distribution**
 
 As
        the
        interactive entertainment industry continues to evolve, new revenue streams
        are
        emerging from the growing trends of digital content creation and distribution.
        While still nascent, these revenue opportunities are expected to increase
        significantly in future years. We are currently focused on generating revenue
        from in-game advertising. Our current game and upcoming sequel game have
        hundreds of potential placements for in-game advertising, which can be updated
        weekly, either dynamically or via our automatic update-game feature. To date,
        Jeep, GameStop and Dell Computers have placed ads in our current
        game.
 
 In
        future
        years, we plan to consider adding other new revenue opportunities, including
        downloadable content/micro-transactions, mobile content and massively
        multiplayer online gaming. We also believe that online delivery of episodic
        content will continue to become more prevalent as broadband connectivity
        gains
        popularity and digital delivery platforms such as Xbox Live, PlayStation
        Network
        and Valve’s Steam gain additional customers.


**Market
      Industry Overview**





**The
      Computer and Video Game Industry** .
      According to the Entertainment Software Association (“ESA”), the modern-day
      video game industry took form in 1985 with the release of the 8-bit Nintendo
      System ("NES"). Following upon the heels of Nintendo’s introduction of the NES,
      Sega Enterprises Ltd. released its 16-bit “Genesis” system, which, in turn, was
      followed by Nintendo’s introduction of the “Super NES.” The early 1990s led to a
      rise in the PC game business with the introduction of CD-ROMs, with decreases
      in
      prices for multimedia PCs, and the introduction of high-level 3D graphics cards.
      In 1995-1996, consumers reacted positively to the release of the Sony
      PlayStation and Nintendo 64 and ushered in a new generation of video game
      consoles. Since 1996, computer and video game sales have seen a steady
      increase.





According
      to ESA, in 1999 and 2000, the computer and video game industry reached new
      heights with the introduction of new video game consoles that allowed users
      to
      play games, as well as watch DVDs and listen to audio CDs. According to ESA,
      the
      video game business experienced strong growth, in spite of the economic
      recession after the turn of the century.





According
      to the NPD Group, a provider of consumer and retail information based in Port
      Washington New York 2006 U.S. retail sales of video games and PC games, which
      includes console and portable hardware, software and accessories, were
      approximately $13.5 billion, which exceeded the previous record set in 2002
      by
      over $1.7 billion.





Sales
      growth in the game software industry is more than double the growth rate of
      the
      U.S. economy as a whole, according to a study of the U.S. Government Census
      and
      other economic data, as reported in an ESA report. Analysts predict that more
      money will be spent again this year on interactive software than at the box
      office.


6


**Internet,
      Online and Wireless Video Games** .
      The
      Internet has spawned the phenomenon of multiplayer on-line gaming, which we
      believe will increase with the emergence of broadband capabilities, in addition
      to new wireless mobile phone platforms. With advances in broadband technology
      and the ever increasing use of the Internet, the computer and video game
      industry has witnessed substantial growth in the development of games that
      can
      be played over the Internet, thereby opening up another market as well as other
      revenue models. Organizations have been placing their games on the Internet
      for
      consumer consumption either for the purpose of expanding their markets or as
      a
      way for companies not in the traditional video game industry to gain entrance.
      It is our intent to expand into these new markets, once we establish revenue
      streams from publishing the initial products..




At
      our
      request, in June 2004, the publisher of the *Left
      Behind* book
      series distributed a 20 question survey for the purpose of helping us to
      understand the demographic link between *Left
      Behind* readership and potential purchasers of such branded video games. More than
      3,500
      responses were received. Of those responding, 72% classified themselves as
      players of video games, and 92% said they would consider buying a *Left
      Behind* video
      game for themselves or a family member.





In
      early
      2007, we also launched a survey of our own to fans of our new game, which was
      released in November 2006. The survey was responded to by approximately 1-2%
      of
      those requested. Remarkably, more than 2/3 of all those responding intend to
      buy
      the next product to be released by Left Behind Games.





Sales
      and
      usage of video games, although targeted to predominately younger markets, are
      not exclusive to this marketplace. As technology evolves and game quality
      improves, the sale of hardware is shifting to middle-aged and older audiences.
      The demographics of the interactive industry continue to change as players
      who
      have grown up with games are now buying them as adults, as well as for their
      children.





According
      to a Peter D. Hart Research Associates study, 75% of American heads-of-household
      play computer & video games, 39% of computer gamers are over the age of 35
      and the average game player is 30 years old, 19% are age 50 or older, and 43%
      are women.





The
      study
      also found the typical game purchaser is 37 years old, and adult gamers have
      been playing for an average of 12 years. Further data shows just 35% of gamers
      are under the age of 18, while 43% are 18-49. Interestingly, women age 18+
      constitute a greater portion of the game playing population (28%) than boys
      6-17
      (21%).





The
      same
      survey illustrated an average adult male plays games 7.6 hours per week, with
      the average adult female closing the historical gender gap at 7.4 hours per
      week.





ESA
      indicates that the popularity of computer and video games rivals baseball and
      amusement parks. According to ESA, three times as many Americans (approximately
      145 million) played computer and video games as went to the top five U.S.
      amusement parks and twice as many as attended major league baseball games.
      A
      poll by ESA of 1,600 households ranked computer and video games number one
      as
      their most enjoyable activity.





Consistent
      with past years' numbers, announced by the ESA and annually compiled by the
      NPD
      Group, the majority of games that sold were rated "E" for "Everyone" (53%),
      followed by "Teen" (T) rated games (30%) and by "Mature" (M) rated games (16%).
      In 2002 E-rated games accounted for 55.7% of games sold, T-rated games 27.6%
      and
      M-rated games made up 13.2% of games sold.





According
      to ESA, all interactive games are rated by the Entertainment Software Rating
      Board ("ESRB"), a self-regulatory unit of ESA. The ESRB rating system is the
      benchmark rating system for software for all interactive platforms. The ESRB
      uses the following key elements to evaluate and rate software products:
      violence, sexual content, language, and early childhood development skills.
      Over
      70% of games are rated "E" for everyone (appropriate for ages 6 and
      up).





Although
      our first product is rated “T” for Teens, the rating system is not perfect. For
      example, a recent release of a product rated “T” for Teens released by a
      competing publishing company, did include taking the Lord’s name in vain with
      the phrase “God Da!^$#%”...and the ESRB rating system referred to this expletive
      as “Mild Language”.





The
      first
      step in creating a successful video game product launch is to create a good
      game
      concept, ideally based upon a brand name with consumer awareness. Confirmation
      of the quality of the game is often provided by industry trade publications.
      As
      in comparable industries, previews and reviews can provide significant
      information regarding marketing viability prior to the completion of development
      and commercial release, enabling companies to more effectively manage
      development, marketing expenses and potential inventory risks.


7


Based
      on
      the popularity and success of the *Left
      Behind* Series
      with all ages, we believe that the *Left
      Behind* Brand is
      uniquely positioned for success in the interactive video game marketplace.
      Recent interactive game market studies reveal a rapidly growing market comprised
      of people from all ages and cultures. Based on statements by the president
      of
      the ESA, we believe that the last few years and the next several years are
      watershed years for interactive products. “Leading analysts forecast that the
      next generation of video game consoles may achieve household penetration rates
      approaching 70%, making them nearly as commonplace in American homes as video
      cassette recorders."





Sales
      continue to grow - a record 12 games sold more than one million units in 2004,
      with 9 of these 12 being rated “E” or “T”, and 52 console games sold more than
      500,000 units. Additionally, 55% of the 2004 Top 20 selling computer games
      by
      units sold were Teen (11/20) with 25% Mature (5) and 20% rated Everyone (4).
      The
      Top 20 selling console games were rated 55% as Everyone (11) followed by 25%
      Mature (5) and 20% Teen (4). The NPD Group has announced it will be updating
      how
      PC Games in particular will be reported, to more accurately assess the impact
      of
      subscription-based online games (MMOs) as well as the industry impact from
      digital distribution.





NPD’s
      2005 study found 42% of most frequent gamers play online, with 56% being male
      and 44% being female. A full 34% of heads of households play games on a wireless
      device such as a cell phone or PDA reflecting a substantial increase from 20%
      in
      2002.





**Video
      Game Software And Hardware Industries.** According
      to Michael Pachter, Interactive Entertainment Research Analyst for Wedbush
      Morgan, "The most successful publishers are those who build diverse
      libraries of branded games that produce sequels and recurring revenue
      streams.  With a base-load of steady, sequel-driven revenues, publishers
      have better visibility into their future performance, which leads to better
      planning and investment.  A less-volatile revenue and earnings model also
      leads to more confidence from Wall Street and higher public
      valuations".





In
      his
      2005 E3 commencement speech, Doug Lowenstein said, “The (video game) industry
      needs to continue broadening its audience and creating more games with
      mass-market appeal. Though videogames have been around for 30 years, their
      penetration remains below that of film and television, he pointed out, asking,
      “What do they have that we don’t?” That missing element, he said, is content
      with mass-market appeal at mass-market prices. “There is powerful
      market-expanding potential for making games for audiences that we are less
      accustomed to,” Lowenstein said. As an example, he said that the film The
      Passion of the Christ had a record-breaking $612 million in box-office revenue,
      thus revealing something Hollywood was missing—the religious content was of
      interest to a big audience that doesn’t normally go to movies.





According
      to 2004 NPD study data, console game players most often purchased action 30.1%,
      sports 17.8%, and shooters 9.6%, followed by children/family 9.5%, racing 9.4%,
      role-playing 9.0% and fighting games at 5.4%.





Computer
      gamers, however, most often purchase strategy 26.9%, family & children
      20.3%, and shooter games 16.3%, followed by role-playing games 10%, adventure
      5.9%, sports 5.4% and action games with 3.9%. Our games target both the strategy
      and family markets. Based upon Wedbush Morgan Securities’ research, every game
      in the top ten of 2002 independently generated more than a hundred million
      dollars ($100,000,000).





**Products**





**Left
      Behind Video Games** .
      Our
      mission is to become the world’s leading independent developer and publisher of
      quality interactive entertainment products that perpetuate positive values
      and
      appeal to mainstream and faith-based audiences. We intend to develop products
      to
      include the same types of compelling elements that have made interactive games
      popular for years, and yet offer a less graphic experience to the sexual themes
      and gratuitous violence currently found in many titles. We plan to make all
      games visually and kinetically appealing. We anticipate our titles will be
      classified as both action, strategy and adventure genres, and will likely
      receive either an "E" rating (appropriate for ages 6 and up) or a "T" rating
      (appropriate for ages 13 and up).




In
      order
      to accomplish these goals, our staff and advisory board have extensive
      experience and relationships with professionals from the video game industry,
      including producers, directors, artists, programmers, musicians and others.
      Collectively, our management is experienced in the techniques that are essential
      to today's interactive games, including video, photography, motion capture,
      3D
      face and body rendering, programming technologies, computer graphics, stereo
      sound effects and music production.





Our
      initial product is Left Behind: Eternal Forces, the PC game (“EF”). EF is a real
      time strategy game played by one person or online by up to eight players on
      PCs.
      The game was launched in November 2006 and we have made nine free updates to
      EF
      since the launch. EF has a “T” rating. The game is loosely based on the *Left
      Behind* series
      but is not specific to any one of the *Left
      Behind* novels.


8


We
      intend
      to launch a follow-up product to EF in the Fall of 2007, titled “LEFT BEHIND II:
      Tribulation Forces”. This follow-up product will also be a real time strategy
      game. It will include all of the improvements that we made to EF and will
      include additional game levels and numerous other features.





**Social
      Networking Site** .
      We have
      developed a social networking website named DreamWebSpace.com. DreamWebSpace
      is
      designed to be a family friendly alternative to some of the popular social
      networking sites such as Fox’s Myspace.com. DreamWebSpace has more security,
      language filtering and more monitoring than many of the popular social
      networking sites. We hope to eventually derive advertising revenue from
      DreamWebSpace.





**Marketing**





We
      used a
      variety of avenues for promoting and marketing the launch of EF in November
      and
      December 2006, including television, radio, print advertising, trade shows,
      as
      well as the Internet. We anticipate that the Internet will become a cost
      effective method for developing brand awareness and promoting our
      products.





Interactive
      software publishers use various strategies to differentiate themselves and
      build competitive advantages within the industry such as Platform Focus,
      internal vs. external development, third party distribution, International
      Sales
      and Game Genre Focus. According to Michael Pachter of Wedbush Morgan, "Deciding
      which platforms to publish games for is one of the most important decisions
      a
      publisher faces. Different game platforms require varying development
      costs, time to market, gross margins, and marketing budgets.” Accordingly, we
      initially focused on the PC/Multi-player version of the game. This strategy
      allowed us to focus on the development of our first game, without the required
      processes posed by licensors Sony, Microsoft and Nintendo on their various
      consoles. We intend to release console and portable games into the marketplace
      in the future years with the intent to partner with larger publishing companies
      to limit the effective risk in releasing new titles.





The
      game
      is designed to support two game modes, Storyline and Game World Modes. In
      Storyline mode, gamers will have the opportunity to interact within events
      from
      the novels. In Game World mode, gamers will compete and fight for territory
      in
      an effort to defeat all opponents. The gamers' goal will be to fight against
      the
      Global Community (commanded by the Anti-Christ) with Tribulation Forces. In
      One
      Player game mode, all opponents will be computer generated. However, in
      Multi-player mode, gamers online will compete against each other. Although
      we
      are not focused on the development of an MMOG (Massive Multi-player Online
      Game), at some point in the future, our game could migrate to the MMOG platform
      without tremendous changes in design, game play, storylines and
      structure.




**Proprietary
      Rights**





Our
      future success and ability to compete are dependent, in part, upon our
      proprietary technology. We rely on trade secret, trademark and copyright law
      to
      protect our intellectual property. In addition, we cannot be sure that others
      will not develop technologies that are similar or superior to our technology.
      Furthermore, our management believes that factors such as the technological
      and
      creative skills of our personnel, new product developments, product enhancements
      and marketing activities are just as essential as the legal protection of
      proprietary rights to establishing and maintaining a competitive
      position.





We
      rely
      on trade secrets and know-how and proprietary technological innovation and
      expertise, all of which are protected in part by confidentiality and invention
      assignment agreements with our employees and consultants, and, whenever
      possible, our suppliers. We cannot make any assurances that these agreements
      will not be breached, that we will have adequate remedies for any breach, or
      that our unpatented proprietary intellectual property will not otherwise become
      known or independently discovered by competitors. We also cannot make any
      assurances that persons not bound by an invention assignment agreement will
      not
      develop relevant inventions.





Many
      participants in the computer software and game market have a significant number
      of patents and have frequently demonstrated a readiness to commence litigation
      based on allegations of patent and other intellectual property infringement.
      We
      cannot be sure that future claims will be resolved on favorable terms, and
      failure to resolve such claims on favorable terms could result in a material
      adverse effect on our business, financial condition and results of operations.
      We expect that companies will increasingly be subject to infringement claims
      as
      the number of products and competitors in this industry segment grows and the
      functionality of products in different industry segments overlaps. Responding
      to
      such claims, regardless of merit, could cause product shipment delays or require
      us to enter into royalty or licensing arrangements to settle such claims. Any
      such claims could also lead to time-consuming, protracted and costly litigation,
      which would require significant expenditures of time, capital and other
      resources by our management. Moreover, we cannot be sure that any necessary
      royalty or licensing agreement will be available or that, if available, such
      agreement could be obtained on commercially reasonable terms.


9


**The
      Left Behind License** .
      On
      October 11, 2002, the publisher of the *Left
      Behind* book
      series granted White Beacon an exclusive worldwide license to use the copyrights
      and trademarks relating to the storyline and content of the books in the *Left
      Behind* series
      of novels for the manufacture and distribution of video game products for
      personal computers, CD-ROM, DVD, game consoles, and the Internet. White Beacon
      is owned by Troy A. Lyndon, our chief executive officer and Jeffrey S. Frichner,
      our former president. Messrs. Lyndon and Frichner are members of our board
      of
      directors. White Beacon has sublicensed its *Left
      Behind* book
      series license in its entirety to us, with the written approval of the publisher
      of the *Left
      Behind* books.





The
      license requires us to pay royalties based on the gross receipts on all
      non-electronic products and for electronic products produced for use on personal
      computer systems, and a smaller percentage of the gross receipts on other
      console game platform systems. According to the license agreement, we are
      required to guarantee a minimum royalty during the initial four-year term of
      the
      license, of which we have already paid a portion. This advance will be set
      off
      as a credit against all monies owed subsequently under the license.





**The
      Left Behind Games Sublicense** .
      White
      Beacon has granted us a sublicense of all of its rights and obligations under
      its license with the publisher of the *Left
      Behind* book
      series. In consideration for receiving the sublicense, we issued to White Beacon
      5,850,000 shares of our common stock (which shares were reduced to 3,496,589
      pursuant to our reverse split in February 2006), which have consequently been
      transferred equally among White Beacon’s two partners, Messrs. Lyndon and
      Frichner.





Pursuant
      to the terms and conditions of the sublicense, we are required to comply with
      all terms, conditions and obligations of the original license with the publisher
      of the *Left
      Behind* book
      series. This sublicense is a pass-through to us of the identical, original
      license with no attachments.





**Distribution**





**North
      American Market.** We
      achieved significant distribution for EF through a Distribution Agreement with
      COKeM International Ltd. We sold directly to GameStop and COKeM resold EF to
      a
      number of large retailers, including Sam’s Club, selected Wal-Mart stores,
      Target, Best Buy and Circuit City. We believe that EF was distributed
      at the
      traditional locations where many North American video gamers go to purchase
      and/or rent their video games.




**International
      Market.** We
      sold
      EF internationally through distributors. Those distributors sold EF into a
      number of countries, including Australia, Canada, Singapore and South Africa.
      We
      intend to continue this strategy of selling through international distributors
      with an emphasis on Europe and East Asia.





**The
      Inspirational Bookseller Market.** We
      anticipate that the CBA and related sales channels represent significant
      sell-through opportunities for the *Left
      Behind* Series
      brand. *Left
      Behind* books
      were originally sold exclusively through CBA retailers, until gaining mainstream
      acceptance and tremendous financial success in other distribution venues. Veggie
      Tales by Big Idea Productions, which has sold millions of videos, also released
      products to the CBA market before gaining mainstream acceptance. This
      distribution channel includes thousands of retail outlets. We are developing
      direct-to-store relationships in the inspirational bookseller market to broaden
      our reach, to increase our potential and to pursue building a profitable
      distribution center for other published products into this
      marketplace.





**Competition**





Our
      competitors include established media development companies. Many of our current
      and potential competitors have longer operating histories and financial, sales,
      marketing and other resources substantially greater than those that we possess.
      As a result, our competitors may be able to adapt more quickly to changes in
      the
      media market or to devote greater resources than we can to the sales of our
      media projects.





The
      video
      game industry is intensely competitive and new video game products and platforms
      are regularly introduced. We will compete primarily with other creators of
      video
      games for personal computers and game consoles. We will also compete with other
      forms of entertainment and leisure activities. Significant third party software
      competitors currently include, among others: Activision, Atari, Capcom,
      Electronic Arts, Konami, Namco, Midway, Take-Two, THQ, and Vivendi.





In
      addition, integrated video game console hardware and software companies such
      as
      Sony Computer Entertainment, Nintendo Co. Ltd. and Microsoft Corporation will
      compete directly with us in the development of software titles for their
      respective platforms.


10


Our
      competitors vary in size from small companies to very large corporations, with
      far longer operating histories, and significantly greater financial, marketing
      and product development resources than we have. Due to these greater resources,
      certain of our competitors will be able to undertake more extensive marketing
      and promotional campaigns, adopt more aggressive pricing policies, pay higher
      fees to licensors for desirable products, and devote substantially more money
      to
      game development than we can. We believe that the main competitive factors
      in
      the interactive entertainment software industry include product features and
      quality, compatibility of products with popular platforms, brand name
      recognition, access to distribution channels, marketing support, ease of use,
      price, and quality of customer service. There can be no assurance that we will
      be able to compete successfully with larger, more established video game
      publishers or distributors.




Our
      competitors could also attempt to increase their presence in our target markets
      by forming strategic alliances with other competitors. Such competition could
      adversely affect our gross profits, margins and results of operations. There
      can
      be no assurance that we will be able to compete successfully with existing
      or
      new competitors. Most of our competitors have substantially greater financial
      resources than us, and they have much larger staffs allowing them to create
      more
      games.





**RISK
      FACTORS RELATING TO OUR BUSINESS AND OUR INDUSTRY**





In
      addition to the other information set forth in this report, you should carefully
      consider the following factors that could materially affect our business,
      financial condition or future results. The risks described below are not the
      only risks facing us. Additional risk and uncertainties not currently known
      to
      us or that we currently deem to be immaterial also may materially adversely
      affect our business, financial condition and/or operating results.





**Our
      independent registered public accounting firm has issued a “going concern”
opinion.**





Our
      ability to continue as a going concern is dependent upon our ability to generate
      profitable operations in the future and/or to obtain the necessary financing
      to
      meet our obligations and repay our liabilities arising from normal business
      operations when they come due. We plan to continue to provide for our capital
      requirements by issuing additional equity. No assurance can be given that
      additional capital will be available when required or on terms acceptable to
      us.
      We also cannot give assurance that we will achieve sufficient revenues in the
      future to achieve profitability and cash flow positive operations. The outcome
      of these matters cannot be predicted at this time and there are no assurances
      that, if achieved, we will have sufficient funds to execute our business plan
      or
      to generate positive operating results. Our independent registered public
      accounting firm has indicated that these matters, among others, raise
      substantial doubt about our ability to continue as a going concern.





**Need
      for substantial additional funds.**





We
      currently need additional funds to finance our operations and the development
      of
      our sequel product. Our overall cash requirements for the next 12 months are
      expected to be in excess of $3,000,000. Our cash requirements may vary or
      increase materially from those now planned because of unexpected costs or delays
      in connection with creation of video games, changes in the direction of our
      business strategy, competition, and other factors. Adequate funds for these
      purposes may not be available when needed or on acceptable terms.





**Our
      board of directors is experiencing difficulty in developing a consensus
      regarding a number of difficult issues that currently confront our company
      and
      this lack of consensus may make it difficult for our board to take action on
      behalf of our company.**





Our
      directors hold different points of view on a number of the difficult issues
      that
      confront our Company and their inability to develop a consensus may make it
      difficult for them to take action of behalf of our company.





**It
      is difficult to assess the likelihood of success for an early stage company
      without a long operating history like ours.**





Since
      our
      organization, we have been engaged in start-up and development activities.
      There
      is limited operating history upon which investors may base an evaluation of
      our
      likely future performance.





**There
      is no assurance that we will enjoy successful business development.**





There
      can
      be no assurance that our business strategies will lead to any profits. We face
      risks and uncertainties relating to our ability to successfully implement our
      strategies of creating and marketing video and PC games, and selling the games
      at a profit. Despite the popularity of *Left
      Behind* books
      and other media materials, we do not know whether we can produce video and
      PC
      games for which there will be a demand, or whether *Left
      Behind* ’s
      brand
      success will cross over to video games. You must consider the risks, expenses
      and uncertainties of a company like this, with an unproven business model,
      and a
      competitive and somewhat evolving market. In particular, you must consider
      that
      our business model is based on an expectation that we will be able to create
      games and that demand for video games will sustain itself or increase.


11


**We
      expect the average price of current generation software titles to continue
      to
      decline.**




Consumer
      demand for software for current generation platforms has declined as newer
      and
      more advanced hardware platforms achieve market acceptance. As the gaming
      software industry transitions to next-generation platforms, we expect few,
      if
      any, current generation titles will be able to command premium price points
      and
      we expect that these titles will be subject to price reductions earlier in
      their
      product life cycles than we have seen in prior years. As a result, we have
      reduced prices for our current generation software titles and we expect to
      continue to reduce prices for our current generation software titles which
      will
      have a negative impact on our operating results.





**We
      must pay expenses on behalf of the officers and directors to indemnify them
      for
      wrongdoing.**





Our
      officers and directors are required to exercise good faith and high integrity
      in
      the management of their affairs. The bylaws specifically limit the liability
      of
      such persons to the fullest extent permitted by law. As a result, aggrieved
      parties may have a more limited right to action than they would have had if
      such
      provisions were not present. The bylaws also provide for indemnification of
      the
      officers and directors from any losses or liabilities that may incur as a result
      of the manner in which they operated the business or conducted internal affairs,
      provided that in connection with these activities they acted in good faith
      and
      in a manner which they reasonably believed to be in, or not opposed to, our
      best
      interest. Use of the capital or assets for such indemnification would reduce
      amounts available for the operations or for distribution to the investors.





**Holders
      of shares of our common stock have a greater risk than holders of our preferred
      stock because shares of preferred stock have liquidation preferences over shares
      of our common stock.**





Holders
      of our preferred stock have liquidation preferences over our shares of common
      stock. The result is that in the event of any liquidation, dissolution or
      winding up of our affairs, whether voluntary or involuntary, the holders of
      record of our preferred stock will be entitled to recover their investment
      prior
      and in preference to any distribution of any of our remaining assets or surplus
      funds, if any remain, to the holders of our shares of common stock.





**Our
      revenues will be dependent on the popularity of the** ***Left
      Behind*** **series of novels. If the popularity of this series declines, it may have a
      material adverse effect on our revenues and operating results.**





Since
      1995, the popularity of the *Left
      Behind* series
      of books has grown. However, there can be no assurance that the series will
      sustain its popularity and continue to grow. A decline in the popularity of
      the *Left
      Behind* series
      could adversely affect the popularity of any product based upon the series,
      including the products that we intend to develop and distribute, and that,
      in
      turn, would have a material adverse effect on our revenues and operating
      results. Despite the popularity of the *Left
      Behind* series,
      there can be no guarantee that any video game product based upon the series
      will
      enjoy the same popularity or achieve commercial success.





**Governmental
      regulations could adversely affect the video game industry, including the
      distribution of interactive products over the Internet.**





Changes
      in domestic and foreign laws could affect our business and the development
      of
      our planned video game products, and, more specifically, could adversely affect
      the marketing, acceptance and profitability of our products. There can be no
      assurance that current laws and regulations (or the interpretation of existing
      regulations) will not become more stringent in the future, or that we will
      not
      incur substantial costs in the future to comply with such requirements, or
      that
      we will not be subjected to previously unknown laws and regulations that may
      adversely impact the development and distribution of our intended products
      or
      the operation of our business in general. As Internet commerce continues to
      evolve, we expect that federal, state and foreign governments will adopt laws
      and regulations covering issues such as user privacy, taxation of goods and
      services provided over the Internet, pricing, content and quality of products
      and services. It is possible that legislation could expose companies involved
      in
      electronic commerce to liability, taxation or other increased costs, any of
      which could limit the growth of electronic commerce generally. Legislation
      could
      dampen the growth in Internet usage and decrease its acceptance as a
      communications and commercial medium. If enacted, these laws and regulations
      could limit the market for our products to the extent we sell them over the
      Internet, and have a material adverse effect on our revenues and operating
      results.





**If
      we do not respond to rapid technological change, our products may become
      obsolete.**





The
      market for video game products and services is characterized by rapid
      technological change and evolving industry standards. We cannot assure you
      that
      we will be successful in responding rapidly or in a cost effective manner to
      such developments.


12


**We
      may not be able to achieve our distribution plans.**





Although
      we believe that our plans for marketing and distributing our products are
      achievable, there can be no assurance that we will be successful in our efforts
      to secure distribution agreements with national or regional wholesale or retail
      outlets, or to negotiate international distribution or sublicensing agreements
      regarding the distribution of *Left
      Behind* series
      video games in countries and territories outside of the United States, or that
      we will be able to gain access to CBA wholesale or retail channels of
      distribution. Even if we achieve our desired level of distribution, there can
      be
      no assurance that our games will sell sufficient quantities to generate
      profitable operations.





**Our
      products may have short life cycles and may become quickly obsolete.**





Consumer
      preferences in the video game industry are continuously changing and are
      difficult to predict. Few products achieve market acceptance, and even when
      they
      do achieve commercial success, products typically have short life cycles. We
      cannot be certain that the products we introduce will achieve any significant
      degree of market acceptance, or that if our products are accepted, the
      acceptance will be sustained for any significant amount of time, or that the
      life cycles of any of our products will be sufficient to permit us to recover
      development, manufacturing, marketing and other costs associated with them.
      In
      addition, sales of our games are expected to decline over time unless they
      are
      enhanced or new products are introduced. If the products we create fail to
      achieve or sustain market acceptance, it could result in excess inventory,
      require reductions in the average selling prices of the affected products,
      or
      require us to provide retailers with financial incentives, any one or all of
      which would have a material adverse effect on our operating results and
      financial condition.





**If
      we are unable to maintain our license to** ***Left
      Behind*** **or other intellectual property, our operating results will be adversely
      impacted.**





All
      of
      our planned products are based on or incorporate intellectual property owned
      by
      others. All of our current video game products are based on *Left
      Behind* names
      and themes. We expect that some of the products we publish in the future may
      also be based on intellectual property owned by others. The rights we enjoy
      to
      licensed intellectual property may vary based on the agreement we have with
      the
      licensor. Competition for these licenses is intense and many of our competitors
      have greater resources to take advantage of opportunities for such licenses.
      If
      we are unable to maintain our current licenses and obtain additional licenses
      with significant commercial value, we believe our sales will decline. In
      addition, obtaining licenses for popular franchises owned by others could
      require us to expend significant resources and the licenses may require us
      to
      pay relatively high royalty rates. If these titles are ultimately unpopular,
      we
      may not recoup our investment made to obtain such licenses. Furthermore, in
      many
      instances we do not have exclusive licenses for intellectual property owned
      by
      others. In these cases, we may face direct competition from other publishers
      holding a similar license.




**The
      video game industry is very competitive, and we may not be able to compete
      successfully with larger, more established video game publishers.**





The
      interactive entertainment software industry is intensely competitive and new
      interactive entertainment software products and platforms are regularly
      introduced. We will compete primarily with other publishers of interactive
      entertainment software for personal computers and video game consoles. We will
      also compete with other forms of entertainment and leisure activities.





**Our
      ability to develop and market our video game products depends entirely upon
      our
      license from the publisher of the** ***Left
      Behind*** **series.**





On
      October 11, 2002, White Beacon secured the license from the publisher of the *Left
      Behind* series
      to use the copyrights and trademarks relating to the *Left
      Behind* series
      to develop video game products. This license has been sublicensed to Left Behind
      Games in entirety. The license requires Left Behind Games to pay royalties
      and
      other fees on an ongoing basis to the publisher of the *Left
      Behind* series
      and to meet certain product development, manufacturing and distribution
      milestones. The license also grants the publisher of the *Left
      Behind* series
      significant control over the development of products under the license. In
      the
      event we are unable to perform all of the obligations to the publisher of the *Left
      Behind* series
      under the license, the publisher of the *Left
      Behind* series
      may terminate the license leaving us without the ability to develop, manufacture
      and distribute our video game products. The publisher of the *Left
      Behind* series
      rights to review and approve our products may cause delays in shipping those
      products. Our success and our business plan is heavily dependent upon our
      ability to comply with the terms and conditions of the license and the
      sublicense and yet there can be no assurance that we will be able to comply
      with
      all terms and conditions of the license from the publisher of the *Left
      Behind* series
      and sublicense from White Beacon. In the event the license or sublicense is
      terminated for any reason, we would likely be unable to continue to develop,
      sell or otherwise distribute video games based on the *Left
      Behind* series.


13


**Platform
      manufacturers are primary competitors and have approval rights and are expected
      to control the manufacturing of our video game products.**





The
      vast
      majority of commercial video game products are designed to play on a specific
      platform. The platform is the system that runs the game. Within the video game
      industry, there are currently many platforms, including Microsoft Xbox 360,
      Sony
      Playstation 2, Sony PSP, Sony Playstation 3, Nintendo DS, Nintendo GameCube
      and
      Gameboy Advance, Microsoft Windows, and Mac OS. The majority of PC games are
      designed to play on computers running the Microsoft Windows or the MAC OS
      platform. In order to develop a game that will run on a particular console
      platform, it is necessary to enter into a platform licensing agreement with
      a
      console or portable platform manufacturer. The platform manufacturers, Sony,
      Nintendo, and Microsoft, also publish their own video game products and are
      therefore competitors of ours. If we are successful in securing a platform
      licensing arrangement with one or more of these companies, we will most likely
      be required to give them significant control over the approval and manufacturing
      of our products. This could leave us unable to get our products approved,
      manufactured and shipped to customers. Control of the approval and manufacturing
      process by the platform licensors could also increase both our manufacturing
      and
      shipping lead times and related costs. Such delays could harm our business
      and
      adversely affect our financial performance. Additionally, while we are not
      aware
      of any reason that would prevent us from obtaining any desired development
      and/or publishing agreements with any of the hardware platform licensors, we
      have not yet signed any such agreement with any platform manufacturer, and
      we
      cannot guarantee that we will be able to conclude agreements with these third
      parties, or that if we do, the provisions of the agreements will be favorable
      or
      even as good as the comparable agreements executed by any of our competitors.
      If
      we are unable to secure development and/or publishing agreements with the major
      platform manufacturers, we would not be able to bring our products to market
      on
      any such affected platform.





**We
      may not be able to regularly pay dividends to our stockholders or redeem shares
      of preferred stock.**





Our
      ability to pay dividends or redeem shares of preferred stock in the future
      depends on our ability to operate profitably and to generate cash from our
      operations in excess of our operating expenses and debt service obligations.
      The
      payment of dividends or redemption of shares of preferred stock is in the sole
      discretion of our board of directors.





**Future
      terrorist attacks in the United States may result in declining economic
      activity, which could reduce the demand for our products.**





Future
      terrorist attacks in the United States, such as the attacks that occurred in
      New
      York and Washington, D.C. on September 11, 2001, and other acts of terrorism
      or
      war, may result in declining economic activity and reduced demand for our
      products. A decrease in demand would make it difficult for us to renew or
      release our products. Terrorist activities also could directly impact the value
      of our products through damage, destruction or loss.





These
      types of events also may adversely affect the markets in which our securities
      are sold. These acts may cause further erosion of business and consumer
      confidence and spending and may result in increased volatility in national
      and
      international financial markets and economies. Any one of these events may
      cause
      a decline in the demand for video games, delay the time in which our video
      games
      can be created and sold and limit our access to capital or increase our cost
      of
      raising capital.





**General
      economic conditions may adversely affect our financial condition and results
      of
      operations.**





Periods
      of economic slowdown or recession in the United States and in other countries,
      rising interest rates or declining demand for video games, or the public
      perception that any of these events may occur, could result in a general decline
      economic activities, which would adversely affect our financial position,
      results of operations, and cash flow.





**The
      success of our company depends on the continuing contributions of our key
      personnel.**





We
      have a
      skilled management team to seek out developers for our video games. However,
      members of our management team are required to devote only as much time to
      our
      operations as they, in their sole discretion, deem necessary in carrying out
      our
      operations effectively. Any or all of the members of our management team,
      including Troy A. Lyndon, may fail to divide their time efficiency in operating
      our business given their outside obligations. In addition, we do not have
      agreements with any of our management team that hinder their ability to work
      elsewhere or to resign at will and, thus, any executive officer or key employee
      may terminate his or her relationship with us at any time without advanced
      notice.


14


**Significant
      Employees**





We
      employ
      16 full-time workers in the United States. Our Director of Product Development
      and Senior Producer is Kevin Hoekman, age 38. He is a significant employee
      with
      a decade of experience managing a variety of development efforts prior to
      joining us in mid-2006. The Executive Director of Outreach and Sales is Jerome
      Mikulich, age 42, and he is a significant employee. Mr. Mikulich has years
      of
      experience in sales and ministry outreach related activities. The Vice President
      of administration, human resources and corporate events, Robilyn Lyndon, age
      52,
      is a significant employee. Mrs. Lyndon has more than 20 years experience in
      business, finance and administration, and has held numerous positions with
      both
      marketing and consumer products organizations.





**ITEM
      2. DESCRIPTION OF PROPERTY**





Our
      corporate offices consist of a 3,500 square foot facility on 29995 Technology
      Drive in Murrieta, California under a lease agreement through May 2010. Its
      cost
      is $7,545 per month, with annual increases of 4%.





We
      also
      have a 3,500 square foot sales and distribution facility on 38340 Innovation
      Court in Murrieta, California under a lease agreement through October 2009.
      Its
      cost is $3,920 per month, with annual increases of 3.4%.





**ITEM
      3. LEGAL PROCEEDINGS**





We
      are
      subject to litigation from time to time in the ordinary course of our business. We
      have
      received a letter from our former President, and current director, Jeffrey
      Frichner, demanding payment of $36,000 allegedly owed to him by us. Except
      for
      this, there are currently no material actions pending
      or threatened against us.





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





Not
      applicable.





**PART
      II**





**ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS.**




**(a)
      Equity and Related Stockholder Matters**




Our
      common stock is traded in the over-the-counter market on the NASD Bulletin
      Board
      under the symbol “LFBG”. The following table shows the high ask and low bid
      prices for the common stock for each quarter during the last two fiscal years
      ended March 31. The quotations reflect inter-dealer prices, without retail
      mark-up, mark-down or commission and may not represent actual transactions.
      All
      quotations through the quarter ended 12/31/05 reflect prices prior to our 1
      for
      4 reverse split effectuated on February 7, 2006. The quotations for the quarters
      ended 03/31/06 and thereafter reflect prices post 1 for 4 reverse split.





High
                Ask
            
            Low
                BidYear
                ended 3/31/06Quarter
                ended 6/30/05
            
            $
            0.16
            
            $
            0.12Quarter
                ended 9/30/05
            
            
            0.23
            
            
            0.14Quarter
                ended 12/31/05
            
            
            0.35
            
            
            0.20Quarter
                ended 03/31/06
            
            
            4.75
            
            
            0.80Year
                ended 3/31/07Quarter
                ended 6/30/06
            
            $
            3.92
            
            $
            2.10Quarter
                ended 9/30/06
            
            
            5.88
            
            
            2.36Quarter
                ended 12/31/06
            
            
            7.44
            
            
            2.17Quarter
                ended 03/31/07
            
            
            2.45
            
            
            0.18




15


**Dividends**





We
      have
      not declared or paid cash dividends or made distributions in the past, and
      we do
      not anticipate that we will pay cash dividends or make distributions in the
      foreseeable future. We currently intend to retain any future earnings to finance
      our operations.





**Description
      of Securities**





At
      July
      12, 2007, our shares of common and preferred voting stock issued and outstanding
      were held by approximately 1,330 shareholders of record. There are no other
      outstanding options or rights to acquire shares.





**Common
      Stock**





We
      are
      authorized to issue two hundred million (200,000,000) shares of $0.001 par
      value
      common stock of which 46,814,847 shares are currently outstanding as of July
      12,
      2007. Holders of common stock are entitled to one vote per share on each matter
      submitted to a vote at any meeting of stockholders. Shares of common stock
      do
      not carry cumulative voting rights and, therefore, holders of a majority of
      the
      outstanding shares of common stock will be able to elect the entire board of
      directors, and, if they do so, minority stockholders would not be able to elect
      any members to the board of directors. Our board of directors has authority,
      without action by the stockholders, to issue all or any portion of the
      authorized but unissued shares of common stock, which would reduce the
      percentage ownership of the stockholders and which may dilute the book value
      of
      the common stock.





Stockholders
      have no pre-emptive rights to acquire additional shares of common stock. The
      common stock is not subject to redemption and carries no subscription or
      conversion rights. In the event of liquidation, the shares of common stock
      are
      entitled to share equally in corporate assets after satisfaction of all
      liabilities. The shares of common stock, when issued, will be fully paid and
      non-assessable.





Holders
      of common stock are entitled to receive dividends as the board of directors
      may
      from time to time declare out of funds legally available for the payment of
      dividends. We have not paid dividends on common stock and do not anticipate
      that
      it will pay dividends in the foreseeable future.





We
      entered into an agreement with Charter Financial Holdings, LLC in connection
      with consulting services. The compensation section of the agreement requires
      that we issue shares of our common stock to Charter sufficient to ensure that
      its ownership in us, does not fall below 1% of our outstanding common stock.
      The
      result is that for each time we issue or sell stock, we must issue that amount
      of stock to Charter Financial Holdings, LLC to maintain their ownership
      percentage. Charter Financial Holdings, LLC is not required to pay additional
      consideration for those shares.





There
      are
      no conversions, preemptive, or other subscription rights or privileges with
      respect to any shares. Our stock does not have cumulative voting rights which
      mean that the holders of more than fifty percent (50%) of the shares voting
      in
      an election of directors may elect all of the directors if they choose to do
      so.
      In such event, the holders of the remaining shares aggregating less than fifty
      percent (50%) would not be able to elect any directors.





**Preferred
      Stock**





We
      are
      authorized to issue ten million (10,000,000) shares of $0.001 par value
      preferred stock of which 3,586,245 preferred A shares are issued and outstanding
      as of July 12, 2006. Preferred A shares are convertible on a one for one basis
      with our common stock at the sole discretion of the holder. Our preferred A
      shares enjoy one for one common stock voting rights. The preferred stock is
      entitled to preference over the common stock with respect to the distribution
      of
      our assets in the event of our liquidation, dissolution, or winding-up, whether
      voluntarily or involuntarily, or in the event of any other distribution of
      our
      assets of among the shareholders for the purpose of winding-up our affairs.
      The
      authorized but unissued shares of preferred stock may be divided into and issued
      in designated series from time to time by one or more resolutions adopted by
      the
      Board of Directors. The Directors in their sole discretion shall have the power
      to determine the relative powers, preferences, and rights of each series of
      preferred stock.


16


We
      consider it desirable to have one or more classes of preferred stock to provide
      us with greater flexibility in the future in the event that we elect to
      undertake an additional financing and in meeting corporate needs that may arise.
      If opportunities arise that would make it desirable to issue preferred stock
      through either public offerings or private placements, the provision for these
      classes of stock in our certificate of incorporation would avoid the possible
      delay and expense of a stockholders’ meeting, except as may be required by law
      or regulatory authorities. Issuance of the preferred stock would result,
      however, in a series of securities outstanding that may have certain preferences
      with respect to dividends, liquidation, redemption, and other matters over
      the
      common stock which would result in dilution of the income per share and net
      book
      value of the common stock. Issuance of additional common stock pursuant to
      any
      conversion right that may be attached to the preferred stock may also result
      in
      the dilution of the net income per share and net book value of the common stock.
      The specific terms of any series of preferred stock will depend primarily on
      market conditions, terms of a proposed acquisition or financing, and other
      factors existing at the time of issuance. As a result, it is not possible at
      this time to determine the respects in which a particular series of preferred
      stock will be superior to the common stock. Other than one for one exchanges
      of
      preferred stock held by shareholders of our subsidiary, the board of directors
      does not have any specific plan for the issuance of preferred stock at the
      present time and does not intend to issue any such stock on terms which it
      deems
      are not in our best interest or the best interests of our
      stockholders.





**(b)
      Recent Sales of Unregistered Securities**





During
      the fiscal year ended March 31, 2007, we received $5,266,117 in net proceeds
      from the sale of 4,917,009 shares of common stock.




During
      the period, we also issued to independent third parties 8,389,887 shares of
      common stock for services provided, valued at $13,813,804 (based on closing
      price on the respective grant date). We also issued 576,666 shares of common
      stock, valued at $1,865,381 (based on the closing price on the respective grant
      date), to certain employees as additional compensation.




During
      the fiscal year ended March 31, 2007, we issued 224,738 warrants to purchase
      shares of common stock with exercise prices ranging between $0.50 and $2.25.
      We
      have estimated the value of these warrants to be approximately $642,930.




Also
      during the fiscal year ended March 31, 2007, we issued 880,000 shares valued
      at
      $403,000 to accredited investors in association with our Bridge Loan borrowings.




Three
      of
      our officers or former officers previously deferred a portion of their
      compensation, which they have the right to convert to the Company’s Common Stock
      at prices ranging from $0.084 to $1.68 per share. As of March 31, 2007, all
      three of those officers or former officers elected to convert that deferred
      compensation into our common stock at the agreed conversion rates as follows:





·
            Mr.
                Lyndon converted $188,542 of deferred compensation into 2,242,441
                shares
                of our common stock.


·
            Mr.
                Frichner converted $266,128 of deferred compensation into 2,721,463
                shares
                of our common stock.


·
            Mr.
                Axelson converted $126,043 of deferred compensation into 938,534
                shares of
                our common stock.




During
      the period April 1, 2007 through July 12, 2007, we entered into a number of
      sales of unregistered securities to accredited investors to finance our
      business. We sold 9,388,000 shares of our common stock at an average price
      of
      $0.10 per share to raise $913,800 plus a note for $25,000. Most of the shares
      sold were at ten cents per share to our existing investors.




Subsequent
      to March 31, 2007, we issued 1,196,949 shares
      of our common stock to independent third parties for services performed, valued
      at $291,442 (based on the closing price of our common stock on the respective
      grant dates).




We
      also received $130,000 in further gross proceeds
      under the Bridge Loan. We issued 260,000 shares of common stock to the investors
      and 66,000 shares of common stock to the Broker-Dealer as part of that bridge
      financing.




We
      believe the transactions to be exempt under Section 4(2) of the Securities
      Act
      of 1933, as amended, or Regulation D, Rule 506 because they do not involve
      a
      public offering. We believe that this sale of securities did not involve a
      public offering on the basis that each investor is an accredited investor as
      defined in Rule 501 of Regulation D and because we provided each of our
      investors with a private placement memorandum or a stock purchase agreement
      disclosing items set out in Rule 501 and 506 of Regulation D.  The shares
      sold were restricted securities as defined in Rule 144(a)(3). Further, each
      common stock certificate issued in connection with this private offering bears
      a
      legend providing, in substance, that the securities have been acquired for
      investment only and may not be sold, transferred or assigned in the absence
      of
      an effective registration statement or opinion of legal counsel that
      registration is not required under the Securities Act of 1933.


17


**Issuance
      of Preferred Stock**





In
      June
      2004, holders of $150,000 in notes payable converted the outstanding principal
      of $150,000, accrued interest of $17,500 and the 1,793,123 shares of common
      stock held by them into 2,151,747 shares of our Series A preferred stock. The
      holders of Series A preferred stock have a liquidation preference equal to
      the
      sum of the converted principal, accrued interest and value of converted common
      stock, aggregating $188,500 at March 31, 2007. In issuing these securities,
      we
      relied on the exemption from registration provided for by Section 4(2) of the
      Securities Act of 1933. Ray
      Dixon, one of our directors, purchased 717,249 shares through Southpointe
      Financial, and along with another investor, received a lien on the home of
      our
      chief executive officer, Troy Lyndon. The status of this lien is currently
      in
      dispute between the parties.





In
      November 2005, we issued 1,434,498 shares of series A preferred stock valued
      at
      $1.67 per share under a consulting agreement for total deferred consulting
      expense of $2,400,000 to be amortized over the term of the consulting agreement.
      $800,000 was recorded as consulting expense during the year ended March 31,
      2006
      and the remaining $1.6 million was recorded as consulting expense during the
      year ended March 31, 2007. In issuing these securities, we relied on the
      exemption from registration provided for by Rule 701 of the Securities Act
      of
      1933.





We
      believe that each transaction where securities were issued to consultants in
      the
      twelve month period ended March 31, 2007 did not require registration under
      the
      Securities Act of 1933, because they were exempt under Rule 701 of the
      Securities Act of 1933. Moreover, issuances of securities to consultants,
      including those issued after we became a reporting company where the Rule 701
      exemption was no longer available, did not involve any public offering and
      were
      therefore exempt transactions pursuant to Section 4(2) of the Securities Act
      of
      1933. Our basis for this is the fact that the securities were offered and sold
      to a limited number of persons, in a limited number of offers, with a limited
      number of shares offered. In addition, as our consultants and employees, our
      management believes that each of the service providers were sophisticated and
      able to fend for themselves and obtain the information they needed to make
      the
      decision to accept stock in lieu of cash. This is based on the fact that the
      service providers had access to our officers and operations and were in a
      position that enabled them to command access to information that would otherwise
      be contained in a registration statement. An appropriate legend was placed
      on
      the common stock issued to each shareholder.




All the above securities issued pursuant to Rule 506 promulgated as part of
      Regulation D under section 4(2) of the Securities Act of 1933 were offered
      and
      sold to a select group of investors who at the time of investment represented
      themselves to us to be “accredited investors” as defined in Regulation D under
      the Securities Act of 1933, and knowledgeable and sophisticated investors.
      In
      addition, each investor was believed to have had such knowledge and experience
      in financial and business matters that such investor was capable of evaluating
      the merits and risks of their investment into us, and able at the time of
      investment to bear the economic risks of an investment in us. We believe the
      investors to be accredited because we received written confirmation from the
      investor in our subscription agreements and we have no reason to doubt the
      validity of the subscription documents. An appropriate legend was placed on
      the
      common stock issued to each shareholder.





**ITEM
      6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**




**Forward
      Looking Statements**




This
      document contains statements that are considered forward-looking statements.
      Forward-looking statements give our current expectations, plans, objectives,
      assumptions or forecasts of future events. All statements other than statements
      of current or historical fact contained in this annual report, including
      statements regarding our future financial position, business strategy, budgets,
      projected costs and plans and objectives of management for future operations,
      are forward-looking statements. In some cases, you can identify forward -looking
      statements by terminology such as “anticipate,” “estimate,” “plans,”
“potential,” “projects,” “ongoing,” “expects,” “management believes,” “we
      believe,” “we intend,” and similar expressions. These statements are based on
      our current plans and are subject to risks and uncertainties, and as such our
      actual future activities and results of operations may be materially different
      from those set forth in the forward looking statements. Any or all of the
      forward-looking statements in this quarterly report may turn out to be
      inaccurate and as such, you should not place undue reliance on these
      forward-looking statements. We have based these forward-looking statements
      largely on our current expectations and projections about future events and
      financial trends that we believe may affect our financial condition, results
      of
      operations, business strategy and financial needs. The forward-looking
      statements can be affected by inaccurate assumptions or by known or unknown
      risks, uncertainties and assumptions due to a number of factors,
      including:




·
            continued
                development of our technology;·
            consumer
                acceptance of our current and future products·
            dependence
                on key personnel;·
            competitive
                factors;·
            the
                operation of our business; and·
            general
                economic conditions.




18


These
      forward-looking statements speak only as of the date on which they are made,
      and
      except to the extent required by federal securities laws, we undertake no
      obligation to update any forward-looking statements to reflect events or
      circumstances after the date on which the statement is made or to reflect the
      occurrence of unanticipated events. In addition, we cannot assess the impact
      of
      each factor on our business or the extent to which any factor, or combination
      of
      factors, may cause actual results to differ materially from those contained
      in
      any forward-looking statements. All subsequent written and oral forward-looking
      statements attributable to us or persons acting on our behalf are expressly
      qualified in their entirety by the cautionary statements contained in this
      quarterly report.




**Overview**




Left
      Behind Games Inc., a Washington corporation, formerly known as Bonanza Gold,
      Inc., doing business through its subsidiary Left Behind Games Inc., a Delaware
      corporation is in the business of developing and publishing video game products
      based upon the popular Left Behind series of novels. Pursuant to a share
      exchange agreement closed on February 7, 2006, we became a subsidiary of Left
      Behind Games Inc. Washington. As a result of the share exchange agreement,
      our
      shareholders took majority control of Left Behind Games Inc. Washington and
      our
      management became the management of Left Behind Games Inc. Washington
      (collectively, “we”, “our” or “LBG”).




We
      are an
      early stage company founded to develop and publish video game products based
      upon the popular *Left
      Behind* series
      of novels. We have the exclusive world-wide rights to the *Left
      Behind* book
      series and brand, for the purpose of making any form of electronic games, which
      includes video games. *Left
      Behind* novels
      and products are based upon fictional storylines focused on events at the end
      of
      the world, including the ultimate battles of good against evil, which are very
      action oriented and supremely suitable for an engaging series of electronic
      games. According to the book publisher, Tyndale House Publishers, *Left
      Behind’s* series
      of books has sold more than 63 million copies. Accordingly, *Left
      Behind* branded
      products have generated more than $500 million at retail for the *Left
      Behind* book
      series. According to a Barna Research study, *Left
      Behind* has also
      become a recognized brand name by more than 1/3 of Americans. Our management
      believes that *Left
      Behind* products
      have experienced financial success, including the novels, children's books,
      graphic novels (comic books), movies, and music. Our interest in the *Left
      Behind* brand is
      limited to our sublicense to make video games. We have no interest in, nor
      do we
      profit from any other *Left
      Behind* branded
      products.





Our
      rights to use the *Left
      Behind* brand to
      make electronic games is based solely on our sublicense with White Beacon which
      entitles us to all of its rights and obligations under its license with the
      publisher of the *Left
      Behind* book
      series. White Beacon’s exclusive worldwide license from the publisher of the *Left
      Behind* book
      series grants it, and us through our sublicense, the rights to develop,
      manufacture, market and distribute video game products based on the *Left
      Behind* series.





We
      have
      assembled a team of individuals experienced in the video game industry to
      develop and market video games based upon the *Left
      Behind* series.
      Our game(s) feature spiritual weapons such as “prayer” and “worship” which can
      overcome the fighting power of “guns”.




We
      have
      developed our first high quality video game and other associated products based
      upon the *Left
      Behind* trademark. We released our first game in November 2006.




To
      date,
      we have financed our operations primarily through the sale of shares of our
      common stock. During the fiscal year ended March 31, 2007, we borrowed $320,000
      under a Bridge Loan and raised net proceeds of $5,266,117 from the sale of
      4,917,009 shares of our common stock. We continue to generate operating
      losses and have only just begun to generate revenues. Furthermore, the report
      by
      our Independent Registered Public Accounting Firm on our financial statements
      includes a “going concern” modification.




**RESULTS
      OF OPERATIONS**




***Fiscal
      Years Ended March 31, 2007 and March 31, 2006***




*Revenues*




We
      recorded net revenues of $768,237 for the fiscal year ended March 31, 2007.
      Since these were our first revenues, there was no corresponding revenue in
      the
      fiscal year ended March 31, 2006. Almost all of these revenues were from the
      sale of our initial product, a video game named *Left
      Behind: Eternal Forces* .
      The
      majority of the sales were to major retail chains either directly or through
      distributors. We also sold our game to the CBA and Inspirational bookstores
      and
      over the internet. The net revenue figure is net of a reserve that we have
      accrued to cover any potential markdowns or returns of the game.




19


*Cost
      of Sales - Product Costs*




We
      recorded cost of sales - product costs of $598,530 for the fiscal year ended
      March 31, 2007. As discussed above, there was no corresponding cost of sales
      -
      product costs in the fiscal year ended March 31, 2006. Cost of sales - product
      costs consists of product costs and inventory-related operational expenses.
      Cost
      of sales - product costs also includes an inventory reserve of
      $25,834.




*Cost
      of Sales - Intellectual Property Licenses*




We
      recorded cost of sales - intellectual property licenses of $552,326 for the
      fiscal year ended March 31, 2007. As discussed above, there was no corresponding
      cost of sales - intellectual property licenses in the fiscal year ended March
      31, 2006. Cost of sales - intellectual property licenses consists of certain
      royalty expenses, amortization of prepaid royalty costs and amortization of
      certain intangible assets. In particular, cost of sales - intellectual property
      licenses included $500,000 of guaranteed minimum royalty expenses to the
      licensor of the *Left
      Behind* brand,
      $42,326 of music royalties and $10,000 related to a technology
      license.




*General
      and Administrative Expenses*




General
      and administrative expenses were $24,416,356 for the fiscal year ended March
      31,
      2007, compared to $8,042,694 for the fiscal year ended March 31, 2006, an
      increase of $16,373,662 or 204%.




Many
      of
      these general and administrative expenses were non-cash charges since we paid
      many of our consultants in shares of our common stock rather than in cash.
      During the fiscal years ended March 31, 2007 and 2006, we recorded expenses
      relating to these non-cash payments to consultants, including amortization
      of
      prepaid consulting expenses, of $17,435,004 and $6,358,420, respectively. This
      represented a $10,970,384 increase. During the fiscal years ended March 31,
      2007
      and 2006, we also issued shares of common stock to our employees, valued at
      approximately $1,865,381 and $307,500, respectively, an increase of $1,557,881.
      The overall increase in non-cash charges attributable to consultants and
      employees was $12,560,265.




Other
      significant factors in the increase in general and administrative expenses
      were
      advertising expenditures and public relations expenditures associated with
      the
      launch of our initial product. Our advertising and marketing expenses for the
      fiscal year ended March 31, 2007 was $1,217,962, a $1,117,238 increase over
      the
      $100,724 in advertising and marketing expenses that we recorded for the fiscal
      year ended March 31, 2006.




The
      remainder of the increase was due to a variety of factors, including increases
      in wages and salaries due to the hiring of additional employees, increased
      travel expenses, and professional fees.




*Product Development
      Expenses*




Product
      development expenses were $1,209,154 for the fiscal year ended March 31, 2007,
      compared to $568,001 for the fiscal year ended March 31, 2006, an increase
      of
      $641,153 or 113%. These increases are directly attributable to the growth of
      our
      development team and in consulting fees from outside contractors involved in
      game development and testing.




*Net
      Loss*




We
      reported a net loss of $26,084,107 for the fiscal year ended March 31, 2007,
      compared to a net loss of $ 8,608,526 for the
      fiscal year ended March 31, 2006, resulting in an increased loss of $17,475,581.
      In addition, our accumulated deficit at March 31, 2007 totaled $35,631,260.
      These increases are attributable primarily to the factors discussed above.
      As
      noted above, $19,226,185, or 73.7%, of the net loss for the fiscal year ended
      March 31, 2007 arose from the issuance of our common stock to consultants and
      employees, which were non-cash charges.




**CASH
      REQUIREMENTS, LIQUIDITY AND CAPITAL RESOURCES**




At
      March
      31, 2007 we had $14,965 of cash compared to $393,433 at March 31, 2006, a
      decrease of $378,468. At March 31, 2007, we had a working capital deficit of
      $1,562,273 compared to a working capital position of $3,019,786 at March 31,
      2006.


20


*Operating
      Activities*





For
      the
      fiscal years ended March 31, 2007 and 2006, net cash used in operating
      activities was $5,115,073 and **** $1,552,572,
      respectively. The $3,562,501 increase in cash used in our operating
      activities was primarily due to the increase in our general and administrative
      expenses and research and development expenses as we neared the market launch
      of
      our first product. The net losses for the fiscal years ended March 31, 2007
      and
      2006 were $26,084,107 and $ 8,608,526 ,
      respectively, an increase of $17,475,581.





*Investing
      Activities*





For
      the
      fiscal years ended March 31, 2007 and 2006, net cash used in investing
      activities was $846,618 and $69,469, respectively. The increase
      was attributable to purchases of property and equipment and payments for
      trademarks and royalties.





*Financing
      Activities*





For
      the
      fiscal years ended March 31, 2007 and 2006, net cash provided by financing
      activities was $5,583,223 and $1,799,500, respectively. The primary element
      of
      cash provided by financing activities in the fiscal year ended March 31, 2007
      was $5,266,117 from the sale of common stock, net of issuance costs compared
      to
      $1,649,500 in the fiscal year ended March 31, 2006.





*Future
      Financing Needs*





Since
      our
      inception in August 2002 through March 31, 2007, we have raised
      approximately $7.3 million through funds provided by private placement
      offerings. This was sufficient to enable us to development our first product
      and
      to make some improvements to that product. Although we expect this trend of
      financing our business through private placement offerings to continue, we
      can
      make no guarantee that we will be adequately financed going forward. However,
      it
      is also anticipated that in the event we are able to continue raising funds
      at a
      pace that exceeds our minimum capital requirements, we may elect to spend cash
      to expand operations or take advantage of business and marketing opportunities
      for our long-term benefit. Additionally, we intend to continue to use equity
      whenever possible to finance marketing, public relations and development
      services that we may not otherwise be able to obtain without cash.




We
        have
        reduced our staff in order to preserve cash. This personnel reduction does
        not
        negatively impact our game development because of our use of outsourcing.
        This
        structure allows us to expand the size of the development team on a
        product-by-product basis without substantially increasing our long-term monthly
        burn-rate of cash.




**Going
      Concern**





As
      of the
      fiscal year ended March 31, 2007, we have started to generate revenue, and
      through March 31, 2007 have incurred net losses of $35,631,260 and have had
      negative cash flows from operations of $6,886,863 from our inception through
      March 31, 2007. Following the launch of our product, we significantly downsized
      both our domestic and contracted international workers in order to reduce our
      ongoing cash expenditures. We also built up a significant level of accounts
      payable due to the expenses associated with our product launch.





Our
      ability to continue as a going concern is dependent upon our ability to generate
      profitable operations in the future and/or to obtain the necessary financing
      to
      meet our obligations and repay our liabilities arising from normal business
      operations when they come due. We plan to continue to provide for our capital
      requirements by issuing additional equity. No assurance can be given that
      additional capital will be available when required or on terms acceptable to
      us.
      We also cannot give assurance that we will achieve sufficient revenues in the
      future to achieve profitability and cash flow positive operations. The outcome
      of these matters cannot be predicted at this time and there are no assurances
      that, if achieved, we will have sufficient funds to execute our business plan
      or
      to generate positive operating results.





Our
      independent registered public accounting firm has indicated that these matters,
      among others, raise substantial doubt about our ability to continue as a going
      concern.





**Critical
      Accounting Policies**




Our
      consolidated financial statements have been prepared in accordance with
      accounting principles generally accepted in the United States. The preparation
      of these financial statements requires us to make estimates and judgments that
      affect the reported amounts of assets, liabilities, revenues and expenses,
      and
      related disclosure of contingent assets and liabilities. We base our estimates
      on historical experience and on various other assumptions that are believed
      to
      be reasonable under the circumstances, the results of which form the basis
      of
      making judgments about the carrying values of assets and liabilities that are
      not readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions, however, in the past the
      estimates and assumptions have been materially accurate and have not required
      any significant changes. Specific sensitivity of each of the estimates and
      assumptions to change based on other outcomes that are reasonably likely to
      occur and would have a material effect is identified individually in each of
      the
      discussions of the critical accounting policies described below. Should we
      experience significant changes in the estimates or assumptions which would
      cause
      a material change to the amounts used in the preparation of our financial
      statements, material quantitative information will be made available to
      investors as soon as it is reasonably available.


21


We
      believe the following critical accounting policies, among others, affect our
      more significant judgments and estimates used in the preparation of our
      consolidated financial statements:





**Software
      Development Costs.** Research
      and development costs, which consist of software development costs, are expensed
      as incurred. Software development costs primarily include payments made to
      independent software developers under development agreements. SFAS No. 86, *Accounting
      for the Cost of Computer Software to be Sold, Leased, or Otherwise
      Marketed* ,
      provides for the capitalization of certain software development costs incurred
      after technological feasibility of the software is established or for the
      development costs that have alternative future uses. We believe that the
      technological feasibility of the underlying software is not established until
      substantially all product development is complete, which generally includes
      the
      development of a working model. No software development costs have been
      capitalized to date.





**Impairment
      of Long-Lived Assets.** We
      review
      our long-lived assets for impairment whenever events or changes in circumstances
      indicate that the carrying amount of an asset may not be recoverable.
      Recoverability of assets to be held and used is measured by a comparison of
      the
      carrying amount of the assets to future net cash flows expected to be generated
      by the assets. If the assets are considered to be impaired, the impairment
      to be
      recognized is measured by the amount by which the carrying amount exceeds the
      present value of estimated future cash flows. At March 31, 2007, our management
      believes there is no impairment of its long-lived assets. There can be no
      assurance however; that market conditions will not change or that there will
      be
      demand for our products, which could result in impairment of long-lived assets
      in the future.





**Stock-Based
      Compensation** .
      Effective April 1, 2006, on the first day of our fiscal year 2006, we adopted
      the fair value recognition provisions of SFAS No. 123(R), *Share-Based*  *Payments* ,
      using
      the modified-prospective transition method. Under this transition method,
      compensation cost recognized in the fiscal year ended March 31, 2007 includes:
      (a) compensation cost for all share-based payments granted and not yet vested
      prior to April 1, 2006, based on the grant date fair value estimated in
      accordance with the original provisions of SFAS No. 123, *Accounting
      for Stock-Based Compensation* ,
      and (b)
      compensation cost for all share-based payments granted subsequent to March
      31,
      2006 based on the grant-date fair value estimated in accordance with the
      provisions of SFAS No. 123(R). SFAS No. 123(R) requires forfeitures to be
      estimated at the time of grant and revised, if necessary, in subsequent periods
      if actual forfeitures differ from those estimates. As of March 31, 2007, we
      had
      no options outstanding and therefore believe the adoption of SFAS No. 123(R)
      to
      have an immaterial effect on the accompanying consolidated financial
      statements.





We
      calculate stock-based compensation by estimating the fair value of each option
      using the Black-Scholes option pricing model. Our determination of the fair
      value of share-based payment awards are made as of their respective dates of
      grant using the option pricing model and that determination is affected by
      our
      stock price as well as assumptions regarding a number of subjective variables.
      These variables include, but are not limited to, our expected stock price
      volatility over the term of the awards, and actual and projected employee stock
      option exercise behavior. The Black-Scholes option pricing model was developed
      for use in estimating the value of traded options that have no vesting or
      hedging restrictions and are fully transferable. Because our employee stock
      options have certain characteristics that are significantly different from
      traded options, the existing valuation models may not provide an accurate
      measure of the fair value of our employee stock options. Although the fair
      value
      of employee stock options is determined in accordance with SFAS No. 123(R)
      using
      an option-pricing model, that value may not be indicative of the fair value
      observed in a willing buyer/willing seller market transaction. The calculated
      compensation cost, net of estimated forfeitures, is recognized on a
      straight-line basis over the vesting period of the option.





Stock-based
      awards to non-employees are accounted for using the fair value method in
      accordance with SFAS No. 123, *Accounting
      for Stock-Based Compensation* ,
      and
      Emerging Issues Task Force (“EITF”) Issue No. 96-18, *Accounting
      for Equity Instruments that are issued to Other Than Employees
      for*  *Acquiring,
      or in Conjunction with Selling Goods or Services* .
      All
      transactions in which goods or services are the consideration received for
      the
      issuance of equity instruments are accounted for based on the fair value of
      the
      consideration received or the fair value of the equity instrument issued,
      whichever is more reliably measurable. The measurement date used to determine
      the fair value of the equity instrument issued is the earlier of the date on
      which the third-party performance is complete or the date on which it is
      probable that performance will occur. We account for stock-based awards to
      non-employees by using the fair value method.





In
      accordance with EITF Issue No. 00-18, *Accounting
      Recognition for Certain Accounting Transactions Involving Equity Instruments
      Granted to Other Than Employees,* an asset
      acquired in exchange for the issuance of fully vested, non-forfeitable equity
      instruments should not be presented or classified as an offset to equity on
      the
      grantor's balance sheet once the equity instrument is granted for accounting
      purposes. Accordingly, we have recorded the fair value of the common stock
      issued for certain future consulting services as prepaid expenses in its
      consolidated balance sheet.


22


**Revenue
      Recognition.** We
      evaluate the recognition of revenue based on the criteria set forth in
      SOP 97-2, *“Software
      Revenue Recognition”* ,
      as
      amended by SOP 98-9, *“Modification
      of SOP 97-2, Software Revenue Recognition, With Respect to Certain
      Transactions”* and
      Staff
      Accounting Bulletin (“SAB”) No. 101, *“Revenue
      Recognition in Financial Statements”* ,
      as
      revised by SAB No. 104, *“Revenue
      Recognition”.* We
      evaluate revenue recognition using the following basic criteria and recognize
      revenue when all four of the following criteria are met:


•
            Evidence
                of an arrangement: Evidence of an agreement with the customer that
                reflects the terms and conditions to deliver products must be present
                in
                order to recognize revenue.•
            Delivery:
                Delivery is considered to occur when the products are shipped and
                risk of
                loss and reward have been transferred to the customer.•
            Fixed
                or determinable fee: If a portion of the arrangement fee is not fixed
                or
                determinable, we recognize that amount as revenue when the amount
                becomes
                fixed or determinable.•
            Collection
                is deemed probable: At the time of the transaction, we conduct a
                credit
                review of each customer involved in a significant transaction to
                determine
                the creditworthiness of the customer. Collection is deemed probable
                if we
                expect the customer to be able to pay amounts under the arrangement
                as
                those amounts become due. If we determine that collection is not
                probable,
                we recognize revenue when collection becomes probable (generally
                upon cash
                collection).





Determining
      whether and when some of these criteria have been satisfied often involves
      assumptions and judgments that can have a significant impact on the timing
      and
      amount of revenue we report. For example, for multiple element arrangements,
      we
      must make assumptions and judgments in order to: (1) determine whether and
      when each element has been delivered; (2) determine whether undelivered
      products or services are essential to the functionality of the delivered
      products and services; (3) determine whether vendor-specific objective
      evidence of fair value (“VSOE”) exists for each undelivered element; and
      (4) allocate the total price among the various elements we must deliver.
      Changes to any of these assumptions or judgments, or changes to the elements
      in
      a software arrangement, could cause a material increase or decrease in the
      amount of revenue that we report in a particular period.





*Product
      Revenue:* Product
      revenue, including sales to resellers and distributors (“channel partners”), is
      recognized when the above criteria are met. We reduce product revenue for
      estimated future returns, price protection, and other offerings, which may
      occur
      with our customers and channel partners.





*Shipping
      and Handling:* In
      accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-10, *“Accounting
      for Shipping and Handling Fees and Costs”* ,
      we
      recognize amounts billed to customers for shipping and handling as revenue.
      Additionally, shipping and handling costs incurred by us are included in cost
      of
      goods sold.




The
      Company promotes its products with advertising, consumer incentive and trade
      promotions. Such programs include, but are not limited to, cooperative
      advertising, promotional discounts, coupons, rebates, in-store display
      incentives, volume based incentives and product introductory payments (i.e.
      slotting fees). In accordance with EITF No. 01-09 "Accounting for Consideration
      Given by a Vendor to a Customer or Reseller of the Vendors Products" certain
      payments made to customers by the Company, including promotional sales
      allowances, cooperative advertising and product introductory expenditures have
      been deducted from revenue. During the fiscal year ended March 31, 2007, we
      recorded a total of $89,112 under such types of arrangements.




**ITEM
      7. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
      DATA**





See
      “Index to Consolidated Financial Statements” on page F-1 for a listing of the
      Consolidated Financial Statements and Schedule filed with this
      report.




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





Not
      applicable


23


**ITEM
      8A. CONTROLS AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures**





Our
      chief
      executive officer and chief financial officer carried out an evaluation of
      the
      effectiveness and operation of our disclosure controls and procedures. They
      have
      concluded after evaluating the effectiveness of our disclosure controls and
      procedures as of March 31, 2007, that as of such date, our disclosure controls
      and procedures were effective and designed to ensure that material information
      relating to us was made known to them by others.





**Changes
      in Internal Controls**





There
      have been no significant changes in our internal controls or in other factors
      that could significantly affect those controls subsequent to the evaluation
      date.





**ITEM
      8B. OTHER INFORMATION.**





Not
      applicable





**PART
      III**





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





**Executive
      Officers of the Registrant**





Our
      directors and executive officers as of July 12, 2007, include the following
      persons:




**Name**
            
            **Age**
            
            **Position**Troy
                A. Lyndon
            
            42
            
            Chairman
                & Chief Executive OfficerJames
                B. Frakes
            
            50
            
            Chief
                Financial OfficerJeffrey
                S. Frichner
            
            49
            
            DirectorThomas
                H. Axelson
            
            63
            
            DirectorRay
                Dixon
            
            54
            
            Director





***Troy
      A. Lyndon, chief executive officer and chairman of the board of
      directors*** ,
      age 42,
      is the chief executive officer of Left Behind Games Inc. As the former chief
      executive officer of Studio Arts Multimedia, Inc., he managed and worked to
      develop six multi-million dollar video game projects for Corel Corporation.
      Previously, Mr. Lyndon served as president of Park Place Productions where
      he
      managed operations, including the publication and/or development for over 50
      video game projects. Park Place Productions under Mr. Lyndon’s leadership,
      became North America’s largest independent video game development company. Mr.
      Lyndon has over 20 years experience in the management and development of
      software projects, including computer and video game products such as Madden
      Football, Batman Returns, Defender of the Crown, and Street Fighter. Mr. Lyndon
      is also a recipient of the Entrepreneur of the Year award from Inc. Magazine,
      Merrill Lynch and Ernst & Young. Mr. Lyndon has also served many ministries
      and Christian publishers, including the Billy Graham Evangelistic Association,
      Campus Crusade for Christ International, the Bright Media Foundation, the
      publisher of the *Left
      Behind* book
      series and Biblesoft.





***James
      B. Frakes, chief financial officer*** ,
      age 50,
      was appointed chief financial officer of Left Behind Games Inc. in November
      2006. Prior to joining us, Mr. Frakes was the chief financial officer of NTN
      Communications, Inc. from April 2001 through June 2005. Mr. Frakes serves on
      the
      Board of Youth Tennis San Diego, a nonprofit organization. He holds an MBA
      from
      the University of Southern California and a BA from Stanford
      University.


24


***Jeffrey
      S. Frichner, member of the board of directors*** ,
      age 49,
      formerly was the president and secretary of Left Behind Games Inc. Currently,
      he
      is managing director of Good News Capital, LLC, a financial relations and
      consulting firm. Previously, he was national accounts manager for Raindance
      Communications, Inc. Prior to that, Mr. Frichner was the director of business
      development for Enable Incorporated. Previous to that, he was Vice President
      of
      Corporate Finance and Investments for Janda, Phillips and Garrington, LLC.
      Prior, Mr. Frichner was a registered representative with Dean Witter Reynolds.
      He holds a BA in business and marketing from National University and is a former
      United States Marine.





***Thomas
      H. Axelson, member of the board of directors*** ,
      age 63,
      formerly was the chief financial officer of Left Behind Games Inc. He also
      currently serves as the Foundations Relations Manager for the largest ministry
      of Campus Crusade for Christ International. For more than 35 years, Mr. Axelson
      has devoted his life to ministry. During the past 15 years, he has managed
      allocations of more than $350 million to support Campus Crusade for Christ
      operations worldwide. Mr. Axelson received his B.S. in Chemistry and Biology
      from Bemidji State University and holds an M.A. in Management from Claremont
      Graduate School.





***Ray
      Dixon, member of the board of directors*** ,
      age 53,
      is a vice president of Southpointe Financial Group and has been with Southpointe
      for 21 years. Mr. Dixon has decades of experience in operations management
      of
      publishing and lending institutions. Further, Mr. Dixon has 23 years experience
      in real estate finance and investments.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
      requires our executive officers and directors and persons who own more than
      ten
      percent of our common stock to file reports of ownership and changes in
      ownership with the SEC. Such executive officers, directors and greater than
      ten
      percent stockholders are also required by SEC rules to furnish us with copies
      of
      all Section 16(a) forms they file. Based on information supplied to us and
      filings made with the SEC, we believe that, during the fiscal year ended March
      31, 2007, Section 16(a) filing requirements applicable to its directors ,
      officers, and greater than ten percent beneficial owners were not complied
      with.
      Messrs. Lyndon and Frichner filed Form 3s on April 21, 2006. Mr. Axelson filed
      a
      late Form 3 on July 12, 2007. Mr. Frakes and Mr. Dixon filed late Form 4s on
      July 10, 2007.





**ITEM
      10. EXECUTIVE COMPENSATION**





**COMPENSATION
      DISCUSSION AND ANALYSIS**





Our
      Compensation Discussion and Analysis addresses the following topics with respect
      to Named Executive Officer (NEO) compensation processes and
      decisions:




**General**




The
      board
      has not yet appointed a Compensation Committee, so the full board is responsible
      for establishing the company’s overall compensation strategy, with support from
      management and consultants. To date, however, the board has not approved the
      compensation of management. The board also oversees the company’s current stock
      option plan, and is responsible for administering the plan.




Our
      compensation arrangements reflect the individual circumstances surrounding
      the
      applicable executive officer’s hiring or appointment.




**Principal
      Components of Compensation of Our Executive Officers**





The
      principal components of the compensation we have historically paid to our
      executive officers have consisted of equity
      compensation, generally in the form of grants of our common stock.




Our
      board
      and management have not yet established a consensus on policies or guidelines
      with respect to the mix of base salary, bonus, cash incentive compensation
      and
      equity awards to be paid or awarded to our executive officers. In general,
      the
      board believes that a greater percentage of the compensation of the most senior
      members of our management should be performance-based. In future fiscal years,
      the board anticipates adopting more formal and structured compensation policies
      and programs, including the formation of a compensation committee. At such
      time,
      the board will endeavor to implement policies designed to attract, retain and
      motivate individuals with the skills and experience necessary for us to achieve
      our business objectives. These policies will also serve to link pay with
      measurable performance, which, in turn, should help to align the interests
      of
      our executive officers with our shareholders.


25


The
      board
      meets in-person at least five **** times
      per
      year. It also meets as necessary, either in person or via telephone to discuss
      compensation and other issues. It met ten **** times
      during the past fiscal year. The
      Board
      works with our management in carrying out its responsibilities.




**Base
      Salary**




*Our
      Chief Executive Officer*




We
      hired
      Troy A. Lyndon as our Chief Executive Officer in 2002. Mr. Lyndon’s employment
      agreement with us provides for an annual base salary of $150,000. In
      the
      future, based upon revenue benchmarks, this amount can increase commensurate with our increased revenues, to a maximum salary of $300,000 per
      year. The terms of Mr. Lyndon's employment agreement include certain incentive
      bonuses. Under the agreement, Mr. Lyndon may achieve increases in his annual
      salary and varying levels of bonuses once we acheive certain revenue benchmarks.
      The initial benchmark to receive an increase in his salary over the current
      level of $150,000 and to receive a bonus is $4 million for a fiscal year.
      Mr. Lyndon has not earned a bonus under an agreement because we have not reached
      the revenue target of $4 million.




*Our
      Chief Financial Officer*




We
      hired
      James B. Frakes as our as our chief financial officer in November 2006. Our
      employment agreement with Mr. Frakes provides for an initial annual salary
      of
      $140,000 with $10,000 payments upon the filing of each 10-KSB. Subsequently,
      his
      annual salary was increased to $180,000.


*Our
      President*





We
      hired
      Jeffrey S. Frichner as our President in 2002. Our employment agreement with
      Mr.
      Frichner provided for an annual salary of $150,000. Mr. Frichner resigned as
      our
      President on June 8, 2007.





**Bonus
      Compensation**




We
      have
      not historically paid any automatic or guaranteed bonuses to our executive
      officers. However, certain officers have bonus components in connection with
      their performance.




**Equity
      Compensation**




Our
      board
      of directors’ plans
      to
      begin granting equity-based awards to
      attract, retain, motivate and reward our employees, particularly our executive
      officers, and to encourage their ownership of an equity interest in our company.
      We implemented the 2006
      Stock Incentive Plan in January
      2007 . We did
      not grant any options to our executive officers or employees in the fiscal
      year
      ended March 31, 2007.




We
      may
      make future awards of stock options to our executive officers under the  Plan .
      We
      reserve the discretion to pay
      compensation to our executive officers that may not be deductible .




We
      do not
      have any program, plan or practice that requires us to grant equity-based awards
      on specified dates. Authority to make equity-based awards to executive officers
      rests with the board, which considers the recommendations of our chief executive
      officer and other executive officers.




**Deferred
      Compensation**





Three
      of
      our officers or former officers previously deferred a portion of their
      compensation, which they have the right to convert to the company’s Common Stock
      at prices ranging from $0.084 to $1.68 per share. All three of those officers
      or
      former officers elected to convert that deferred compensation into our common
      stock at the agreed conversion rates as follows:





·
            Mr.
                Lyndon converted $188,542 of deferred compensation into 2,242,441
                shares
                of our common stock.


·
            Mr.
                Frichner converted $266,128 of deferred compensation into 2,721,463
                shares
                of our common stock.


·
            Mr.
                Axelson converted $126,043 of deferred compensation into 938,534
                shares of
                our common stock.


26


***Severance
      and Change of Control Payments***





Our
      board
      of directors believes that companies should provide reasonable severance
      benefits to employees, recognizing that it may be difficult for them to find
      comparable employment within a short period of time.




Our
      employment agreement with Mr. Lyndon provides that, if Mr. Lyndon is terminated
      without cause, he is
      entitled to receive an amount equal to six (6) months' base
      compensation. We believe that the termination provisions of Mr. Lyndon’s
      employment agreement are comparable to those in effect for chief executive
      officers of companies comparable to us, in terms of size, revenue, profitability
      and/or nature of business.




***Perquisites***




Each
      of
      our executive officers receives similar perquisites. We have agreed to reimburse
      each executive officer for all reasonable travel, entertainment and other
      expenses incurred by them in connection with the performance of their duties
      and
      obligations. Certain of our executive officers receive an automobile allowance
      and payment of other automobile expenses. Pursuant to his employment agreement,
      Mr. Lyndon receives a monthly car allowance of up to $1,000, plus actual
      maintenance, repair and insurance costs. Mr. Frichner also received a car
      allowance of up to $1,000, plus actual maintenance, repair and insurance
      costs.




We
      also
      provide health insurance for Messrs. Lyndon and Frakes and has agreed to provide
      for Mr. Frichner’s individual health insurance for a period of six months
      following his resignation in early June 2007.





***Compensation
      Committee Interlocks and Insider Participation***




We
      have
      not yet designated a Compensation Committee. All compensation matters are
      approved by the full board. Mr. Lyndon and Mr. Frichner were our employees
      or
      former employees during the past fiscal year. None of our executive officers
      served on the compensation committee (or equivalent), or the board, of another
      entity whose executive officer(s) served on our board.




**Summary
      Compensation Table**




The
      cash
      and non-cash compensation that we have paid during the fiscal year ended March
      31, 2007, March 31, 2006 and March 31, 2005 or that was earned by our chief
      executive officer and our other executive officers is detailed in the following
      table.


**Name
                  and Principal Position**
              
              **Year**
              
              **Salary**
              
              **Stock**
                **Awards
                  (3)**
              
              **All
                  Other**
                **Compensation**
              
              **Total**Troy
                  A. Lyndon
                Chairman
                  and Chief Executive Officer
              
              2007
                2006
                2005
              
              $150,000
                120,973
                71,944
              
              $
                  --
              
              41,739(1)
              
              $191,739Jeffrey
                  S. Frichner
                Former
                  President
              
              2007
                2006
                2005
              
              $143,800
                126,878
                110,792
              
              --
              
              49,729(2)
              
              $193,529James
                  B. Frakes
                Chief
                  Financial Officer
              
              2007
              
              $
                   71,564*
              
              $131,475
              
              **--**
              
              $203,039Kevin
                  Hoekman
                Senior
                  Producer
              
              2007
              
              $108,992 *
              
              $554,000
              
              **--**
              
              $662,992David
                  Klein
                Former
                  Senior Vice President
              
              2007
              
              $  88,846 *
              
              $355,500
              
              **--**
              
              $444,346





(1)
      Includes
      $31,000 paid as board attendance fees and $10,739 as automobile related
      compensation.


(2)
      Includes $31,000
      paid as board attendance fees and $18,729 as automobile related
      compensation. Frichner
      resigned as President in June 2007.


(3) Stock grants are valued as of the grant date.


*
      Frakes, Hoekman and Klein were all for partial years. Klein resigned on April
      2007.


27


**Compensation
      of Our Independent Directors**




Currently,
      our directors do not receive compensation. It is anticipated, however, that
      each
      of our directors may receive compensation at some point in the
      future.




In
      connection with his previous service as our chief financial officer, Mr. Axelson
      had the right to convert certain deferred compensation of $126,043 into an
      additional 938,534 shares of our common stock at post reverse split rate ranging
      from $0.084 to $1.68 per share. He has
      elected to fully convert his deferred compensation.





**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS**





The
      following table presents information about the beneficial ownership of our
      voting securities as of July 12, 2007 by:





·
            each
                person or entity who is known by us to own beneficially more than
                5% of
                the outstanding shares of our voting
                securities;





·
            each
                of our directors and named executive
                officers;





·
            all
                directors and executive officers as a group.




Beneficial
      ownership is determined in accordance with the rules of the Securities and
      Exchange Commission and generally includes voting or investment power with
      respect to securities, subject to community property laws, where applicable.
      The
      percentage of beneficial ownership of our shares of voting securities subject
      to
      this SEC filing is based on a total of 50,401,092 combined shares of voting
      preferred and common stock outstanding as of July 12, 2007.





**Name
                and Address of Beneficial Owner**
            
            **Class
                of**
              **Voting
                Stock**
            
            **Number
                of Shares**
              **of
                Voting Stock**
              **Beneficially
                Owned (1)**
            
            **Percentage**
              **of
                Class**Troy
                A. Lyndon
              25060
                Hancock, Suite 103 Box 110
              Murrieta,
                California 92562
            
            Common
                Stock
            
            3,990,735
            
            7.9%Jeffrey
                S. Frichner
              43980
                Mahlon Vail Cir, Ste 2701 Temecula, CA 92592
            
            Common
                Stock
            
            4,299,757
            
            8.5%James
                B. Frakes
            
            Common
                Stock
            
            150,000
            
            0.3%25060
                Hancock Ave., Suite 103 Box 110
              Murrieta,
                CA 92562Thomas
                H. Axelson
              29931
                Mirongo Place
              Laguna
                Nigel, CA 92677
            
            Common
                Stock
            
            1,132,788
            
            2.2%Southpointe
                Financial (2)
              26471
                Rancho Parkway South, Suite A
              Lake
                Forest, CA 92630
            
            Preferred
                Stock
              and
                Common Stock (3)
            
            1,534,498
            
            3.0%**Total
                (total 5 officers and directors)**
            
            
            
            **11,107,778**
            
            **22.0%**


______________________


(1)
            Calculates
                outstanding securities plus securities that the group may acquire
                within
                the next 60 days pursuant to privileges to convert preferred shares.(2)
            Ray
                Dixon has significant control of Southpointe Financial. Ray Dixon
                is a
                member of our Board of Directors and is the owner of 1,434,498 shares
                of
                our series A preferred stock.


(3)
            Our
                series A preferred stock is convertible into common stock on a 1
                for 1
                basis at the sole discretion of the
                holder.




28


**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE.**





**Transactions
      with Third Party Companies Owned by Executive Officers**





On
      October 11, 2002, Tyndale granted White Beacon an
      exclusive worldwide license ,
      as
      amended, to use the copyrights and trademarks relating to the storyline and
      content of the books in the *LEFT
      BEHIND* series
      of novels for the manufacture and distribution of video game products for
      personal computers, CD-ROM, DVD, game consoles, and the Internet. The license
      was initially set to expire on December 31, 2006, subject to automatic renewal
      for three additional three-year terms so long as Tyndale was paid royalties
      in
      an aggregate amount equal to or in excess of $1,000,000 during the initial
      term
      and $250,000 during each renewal term.




The
      license requires White Beacon to pay the following royalties: (i) 4% of the
      gross receipts on console game platform systems and (ii) 10% of the gross
      receipts on all non-electronic products and for electronic products produced
      for
      use on personal computer systems. White Beacon was required to guarantee a
      minimum royalty of $250,000 during the initial four-year term of the license.
      White Beacon was also required to pay $100,000 to Tyndale as an advance against
      future royalties payable to Tyndale under the License agreement, all of which
      was paid by the Company in fiscal 2003 (see below).





On
      November 14, 2002, White Beacon granted LBG a Sublicense of all of its rights
      and obligations under its license with Tyndale, with the written approval of
      Tyndale. In consideration for receiving the sublicense, we issued to White
      Beacon 3,496,589 shares of our common stock valued at $5,850, which was the
      estimated fair value of the common stock on the date of issuance.





During
      the year ended March 31, 2003, we paid $100,000 to Tyndale as a non-refundable
      advance against the guaranteed minimum royalty of $250,000 payable to Tyndale
      during the initial four-year term. We accrued the remaining guaranteed minimum
      royalty of $150,000 which was included in current liabilities in the
      accompanying consolidated balance sheet at March 31, 2006 and was paid in
      October 2006.





In
      September 2006, the license was amended and extended to December 31, 2009 after
      which it is subject to automatic renewals for additional three year terms if
      we
      have paid and/or prepaid royalties of $250,000 during each renewal period.
      As
      part of this amendment, we must pay Tyndale the remaining $750,000 of the agreed
      original minimum royalty payment on or before March 31, 2007.





The
      license was further amended on May 14, 2007. Under this amendment the remaining
      amount of the minimum royalty payment was reduced from $750,000 to $250,000
      and
      the date of that payment was extended from March 31, 2007 to December 31, 2007.
      We have charged the minimum royalty payment amount to our cost of goods sold
      on
      our March 31, 2007 financial statements.





As
      LB
      Games Ukraine is currently providing software development services only to
      us
      and due to our history of providing on-going financial support to that entity,
      through consolidation we absorb all net losses of this variable interest entity
      in excess of the equity. LB Games Ukraine’s sole asset is cash which has an
      approximate balance of $2,600 at March 31, 2007. During the year ended March
      31,
      2007, we paid approximately $180,000 for software development services provided
      by LB Games Ukraine, which has been recorded as research and development cost
      during the period.





**Our
      Directors’ Other Business Activities**





Our
      directors are involved in a variety of business and professional activities
      outside of managing our operations. These other activities may result in a
      conflict with respect to the allocation of management resources away from our
      operations and to other activities.





**Management
      of the Company**





Our
      Management devotes only such time to our operations as they, in their sole
      discretion deem necessary to carry out our operations effectively. Our officers
      and directors may work on non-profit projects in accordance with their
      respective employment agreements. Conflicts of interest may arise in allocating
      management time, services or functions among such affiliates.


29


**Limitation
      of Rights**





Our
      Bylaws provide that our management will not be liable for actions taken by
      them
      in good faith in furtherance of our business, and will be entitled to be
      indemnified by us in such cases. Therefore, our stockholders may have a more
      limited right against the management, their affiliates and their respective
      related parties than they would have absent such limitations in the Bylaws.
      In
      addition, indemnification of the management, their affiliates and their
      respective related parties could deplete our assets possibly resulting in loss
      by the stockholders of a portion or all of their investment.





**ITEM
      13. EXHIBITS.**


(a) Exhibits:
 Exhibit 3.1
                Articles of Incorporation dated
                  March 29,
                  1961***Exhibit 3.2
                Amendment to Articles of Incorporation
                  dated
                  August 20, 1962***Exhibit 3.3
                Amendment to Articles of Incorporation
                  dated
                  October 17, 1977***Exhibit 3.4
                Amendment to Articles of Incorporation
                  dated
                  June 15, 1999***Exhibit 3.5
                Amended and Restated Articles of
                  Incorporation dated January 30, 2004***Exhibit 3.6
                Bylaws***Exhibit 10.1
                Share Exchange Agreement**Exhibit 10.2
                Employment Agreement with Troy A.
                  Lyndon**Exhibit 10.3
                Addendum dated June 2, 2004 to Employment
                  Agreement with Troy A. Lyndon**Exhibit 10.4
                Addendum dated February 1, 2005
                  to Employment
                  Agreement with Troy A. Lyndon**Exhibit 10.5
                Employment Agreement with Jeffrey
                  S.
                  Frichner**Exhibit 10.6
                Addendum dated June 2, 2004 to Employment
                  Agreement with Jeffrey S. Frichner**Exhibit 10.7
                Addendum dated February 1, 2005
                  to Employment
                  Agreement with Jeffrey S. Frichner**Exhibit 10.8
                Employment Agreement with Thomas
                  H.
                  Axelson**Exhibit 10.9
                Addendum dated June 2, 2004 to Employment
                  Agreement with Thomas H. Axelson**Exhibit 10.10
                Addendum dated February 1, 2005
                  to Employment
                  Agreement with Thomas H. Axelson**Exhibit 10.11
                Sub-License Agreement with White
                  BeaconExhibit 10.12
                Distribution Agreement with COKeM
                  InternationalExhibit 10.13
                Separation Agreement with Jeffrey
                  S.
                  Frichner*Exhibit 14.1
                Code of Ethics for Chief Executive
                  Officer
                  and Senior Financial Officers***Exhibit 31.1
                Certification of principal executive
                  officer
                  pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934,
                  as
                  amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley
                  Act of
                  2002Exhibit 31.2
                Certification of principal financial
                  officer
                  pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934,
                  as
                  amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley
                  Act of
                  2002Exhibit 32.1
                Certification of principal executive
                  officer
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002Exhibit 32.2
                Certification of principal financial
                  officer
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002
 ___________________
 *
          Incorporated by reference from Form 8-K filed on June 13, 2007
 
 **
          Incorporated by reference from Form 8-K filed on February 10, 2006
 
 ***
          Incorporated by reference from Form 10-SB filed on February 23,
          2004


30


**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





KMJ
      Corbin & Company LLP billed us $73,239 for audit-related services during the
      year ended March 31, 2006. KMJ Corbin & Company LLP billed us $102,350 for
      audit-related services during the year ended March 31, 2007.





Audit
      Fees. The aggregate fees billed for the years ended March 31, 2007 and 2006
      were for the audits of our financial statements and reviews of our interim
      financial statements included in our annual and quarterly reports.





Audit
      Related Fees. There were no fees billed for the years ended March 31, 2007
      and 2006 for the audit or review of our financial statements that are not
      reported under Audit Fees.





All
      Other
      Fees. The aggregate fees billed above for the years ended March 31, 2007
      and 2006 included services other than the services described above. These
      services include attendance and preparation for shareholder and audit committee
      meetings, consultation on accounting, on internal control matters and review
      of
      and consultation on our registration statements and issuance of related
      consents.





Financial
      Policies and Procedures. Our management has implemented pre-approval policies
      and procedures related to the provision of audit and non-audit services. Under
      these procedures, management pre-approves both the type of services to be
      provided by KMJ Corbin & Company, LLP and the estimated fees related to
      these services.


31


**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.




LEFT
                BEHIND GAMES INC.(Registrant)




July
                16, 2007
            
            By:
            /s/  James
                B.
                Frakes
              James
                  B. Frakes
                (Duly
                  Authorized Officer, Principal Accounting Officer
                and
                  Principal Financial
                  Officer)




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated:




Date
            
            Signature
            TitleJuly
                16, 2007
            
            /s/
                TROY A.
                LYNDON
              (Troy
                A. Lyndon)
            Chairman,
                Chief Executive Officer, and Director
              (Principal
                Executive Officer)July
                16, 2007
            
            /s/JAMES
                B.
                FRAKES
              (James
                B. Frakes)
            Chief
                Financial Officer (Principal Accounting Officer
              and
                Principal Financial Officer)July
                16, 2007
            
            /s/
                THOMAS H.
                AXELSON
              (Thomas
                H. Axelson)
            DirectorJuly
                16, 2007
            
            /s/
                JEFFREY S.
                FRICHNER
              (Jeffrey
                S. Frichner)
            DirectorJuly
                16, 2007
            
            (Ray
                Dixon)
            Director




32


**LEFT
      BEHIND GAMES I** **NC.**




**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**Page**Report
                of Independent Registered Public Accounting Firm
            
            F-2Consolidated
                Financial Statements:Consolidated
                Balance Sheets as of March 31, 2007 and 2006
            
            F-3Consolidated
                Statements of Operations for the years ended March 31, 2007 and
                2006
            
            F-4Consolidated
                Statements of Stockholders’ Equity (Deficit) for the years ended March 31,
                2007 and 2006
            
            F-5Consolidated
                Statements of Cash Flows for the years ended March 31, 2007 and
                2006
            
            F-6Notes
                to Consolidated Financial Statements
            
            F-8


F-1




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Shareholders and Board of Directors


Left
      Behind Games Inc.





We
      have
      audited the accompanying consolidated balance sheets of Left Behind Games Inc.
      (the “Company’) as of March 31, 2007 and 2006, and the related statements
      of operations, stockholders’ equity (deficit), and cash flows for the years then
      ended. These consolidated financial statements are the responsibility of the
      Company’s management. Our responsibility is to express an opinion on these
      consolidated financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      is not required to have nor were we engaged to perform, an audit of its internal
      control over financial reporting. Our audit included consideration of internal
      control over financial reporting as a basis for designing audit procedures
      that
      are appropriate in the circumstances, but not for the purpose of expressing
      an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the consolidated financial statements. An audit also includes assessing the
      accounting principles used and significant estimates made by management, as
      well
      as evaluating the overall financial statement presentation. We believe that
      our
      audits provide a reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the consolidated financial position of Left Behind Games
      Inc.
      as of March 31, 2007 and 2006, and the results of its operations and its
      cash flows for the years then ended in conformity with accounting principles
      generally accepted in the United States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      the
      Company will continue as a going concern. As more fully described in Note 3
      to
      the consolidated financial statements, the Company has incurred significant
      operating losses and negative cash flows from operations through March 31,
      2007,
      and has an accumulated deficit at March 31, 2007. These items, among other
      matters, raise substantial doubt about the Company’s ability to continue as a
      going concern. Management’s plans in regard to these matters are also described
      in Note 3. The consolidated financial statements do not include any adjustments
      to reflect the possible future effects on the recoverability and classification
      of assets or the amount and classification of liabilities that may result from
      the outcome of this uncertainty.








/s/
      KMJ
      Corbin and Company LLP


KMJ
      Corbin and Company LLP





Irvine,
      California


July
      16,
      2007


F-2







**LEFT
                BEHIND GAMES INC.****CONSOLIDATED
                BALANCE SHEETS**


**March
                  31,**
              
              **March
                  31,****2007**
              
              **2006****ASSETS**CURRENT
                  ASSETS:Cash
              
              $
              14,965
              
              $
              393,433Accounts
                  receivable, net of allowances of $1,130,612
              
              
              502,660
              
              
              --Inventories
              
              
              380,174
              
              
              --Debt
                  issuance costs
              
              
              359,133
              
              
              --Prepaid
                  royalties
              
              
              --
              
              
              250,000Prepaid
                  consulting
              
              
              --
              
              
              3,515,000Other
                  prepaid expenses and current assets
              
              
              38,846
              
              
              4,411Total
                  current assets
              
              
              1,295,778
              
              
              4,162,844Property
                  and equipment, net
              
              
              368,313
              
              
              42,085Intangible
                  assets, net
              
              
              43,441
              
              
              36,329Other
                  assets
              
              
              52,373
              
              
              3,439$
              1,759,905
              
              $
              4,244,697**LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)**CURRENT
                  LIABILITIES:Accounts
                  payable and accrued expenses
              
              $
              2,039,672
              
              $
              296,222Royalty
                  payable to related party
              
              
              250,000
              
              
              150,000Advances
                  from related parties
              
              
              73,000
              
              
              --Notes
                  payable
              
              
              395,056
              
              
              --Deferred
                  salaries
              
              
              --
              
              
              696,836Deferred
                  revenue
              
              
              100,323
              
              
              -Total
                  current liabilities
              
              
              2,858,051
              
              
              1,143,058Deferred
                  rent
              
              
              5,257
              
              
              --Total
                  liabilities
              
              
              2,863,308
              
              
              1,143,058Commitments
                  and contingenciesStockholders'
                  equity (deficit):Series
                  A preferred stock, $0.001 par value; 10,000,000 shares authorized;
                  3,586,245
                shares
                  issued and outstanding; liquidation preference of $188,500
              
              
              3,586
              
              
              3,586Common
                  stock, $0.001 par value; 200,000,000 shares authorized; 35,904,898
                  and
                15,298,658
                  shares issued and outstanding as of March 31, 2007 and March 31,
                  2006,
                  respectively
              
              
              35,842
              
              
              15,299Additional
                  paid-in-capital
              
              
              34,488,429
              
              
              12,729,907Stockholder
                  note receivables
              
              
              --
              
              
              (100,000
              )Accumulated
                  deficit
              
              
              (35,631,260
              )
              
              (9,547,153
              )Total
                  stockholders' equity (deficit)
              
              
              (1,103,403
              )
              
              3,101,639$
              1,759,905
              
              $
              4,244,697




*See
      report of independent registered public accounting firm and*


*accompanying
      notes to consolidated financial statements*


F-3





**LEFT
      BEHIND GAMES INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**







**For
                the****Year
                Ended**
              **March
                31,****2007**
            
            
            **2006**Net revenues
            
            $
            768,237
            
            $
            --Costs
                and expenses:Cost
                of sales - product costs
            
            
            598,530
            
            
            --Cost
                of sales - intellectual property licenses
            
            
            552,326
            
            
            --General
                and administrative
            
            
            24,416,356
            
            
            8,042,694Product
                development
            
            
            1,209,154
            
            
            568,001Total
                costs and expenses
            
            
            26,776,366
            
            
            8,610,695Operating
                loss
            
            
            (26,008,129
            )
            
            (8,610,695
            )Other
                income (expense):Interest
                expense
            
            
            (77,526
            )
            
            -Other
                income
            
            
            2,348
            
            
            2,969Total
                other income (expense), net
            
            
            (75,178
            )
            
            2,969Loss
                before provision for income taxes
            
            
            (26,083,307
            )
            
            (8,607,726
            )Provision
                for income taxes
            
            
            800
            
            
            800Net
                loss
            
            $
            (26,084,107
            )
            $
            (8,608,526
            )Net
                loss available to common stockholders per common share:Basic
                and diluted
            
            $
            (1.24
            )
            $
            (0.85
            )Weighted
                average common shares outstanding:Basic
                and diluted
            
            
            21,069,797
            
            
            10,136,250






*See
      report of independent registered public accounting firm and*


*accompanying
      notes to consolidated financial statements*


F-4




**LEFT
      BEHIND GAMES INC.**


**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)**


For
      The
      Years Ended March 31, 2007 and March 31, 2006





Preferred
                  Series A
              
              Common
                  StockAdditionalPaid-in
              
              Stockholder
              
              AccumulatedShares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Receivable
              
              Deficit
              
              Total**Balance,
                  March 31, 2005**
              
              
              2,151,747
              
              $
              2,152
              
              
              6,885,592
              
              $
              6,887
              
              $
              844,410
              
              $
              -
              
              $
              (938,627
              )
              $
              (85,178
              )Issuance
                  of common stock for cash, net of offering costs
              
              
              -
              
              
              -
              
              
              1,276,975
              
              
              1,277
              
              
              1,648,223
              
              
              -
              
              
              -
              
              
              1,649,500Issuance
                  of common stock to employees for services
              
              
              -
              
              
              -
              
              
              206,219
              
              
              206
              
              
              307,294
              
              
              -
              
              
              -
              
              
              307,500Issuance
                  of common stock to consultants for services
              
              
              -
              
              
              -
              
              
              4,987,908
              
              
              4,988
              
              
              7,433,355
              
              
              -
              
              
              -
              
              
              7,438,343Issuance
                  of preferred stock to consultants for services
              
              
              1,434,498
              
              
              1,434
              
              
              -
              
              
              -
              
              
              2,398,566
              
              
              -
              
              
              -
              
              
              2,400,000Issuance
                  of common stock in exchange for note receivable
              
              
              -
              
              
              -
              
              
              59,771
              
              
              59
              
              
              99,941
              
              
              (100,000
              )
              
              -
              
              
              -Common
                  stock issued in reverse merger with Bonanza Gold in February
                  2006
              
              
              -
              
              
              -
              
              
              1,882,204
              
              
              1,882
              
              
              (1,882
              )
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (8,608,526
              )
              
              (8,608,526
              )**Balance,
                  March 31, 2006**
              
              
              3,586,245
              
              $
              3,586
              
              
              15,298,669
              
              $
              15,299
              
              $
              12,729,907
              
              $
              (100,000
              )
              $
              (9,547,153
              )
              $
              3,101,639Issuance
                  of common stock for cash, net of offering costs of
                  $426,686
              
              
              -
              
              
              -
              
              
              4,917,009
              
              
              5,168
              
              
              5,260,949
              
              
              -
              
              
              -
              
              
              5,266,117Offset
                to note payable to related party
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (50,000
              )
              
              -
              
              
              -
              
              
              (50,000
              )Issuance
                  of common stock pursuant to bridge loan
              
              
              -
              
              
              -
              
              
              880,000
              
              
              880
              
              
              402,120
              
              
              -
              
              
              -
              
              
              403,000Issuance
                  of common stock to employees
              
              
              -
              
              
              -
              
              
              576,666
              
              
              577
              
              
              1,864,804
              
              
              -
              
              
              -
              
              
              1,865,381Issuance
                  of common stock to consultants
              
              
              -
              
              
              -
              
              
              8,389,887
              
              
              8,116
              
              
              13,805,688
              
              
              -
              
              
              -
              
              
              13,813.804Cancellation
                  of stockholder note receivable
              
              
              -
              
              
              -
              
              
              (59,771
              )
              
              (100
              )
              
              (99,900
              )
              
              100,000
              
              
              -
              
              
              -Issuance
                  of common stock for conversion of accrued salaries
              
              
              -
              
              
              -
              
              
              5,902,438
              
              
              5,902
              
              
              574,811
              
              
              -
              
              
              -
              
              
              580,713Sale
                  of stock warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              50
              
              
              -
              
              
              -
              
              
              50Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (35,631,260
              )
              
              (35,631,260
              )**Balance,
                  March 31, 2007**
              
              
              3,586,245
              
              $
              3,586
              
              
              35,904,898
              
              $
              35,842
              
              $
              34,488,429
              
              $
              -
              
              $
              (35,272,904
              )
              $
              (1,103,403
              )






*See
      report of independent registered public accounting firm and*


*accompanying
      notes to consolidated financial statements*


F-5


**LEFT
      BEHIND GAMES INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





**For
                the Year Ended**
              **March
                31,****2007**
            
            **2006****Cash
                flows from operating activities:**Net
                loss
            
            
            
            
            $
            (26,084,107
            )
            $
            (8,608,526
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            
            
            
            288,574
            
            
            9,366Loss
                on disposal of assets
            
            
            
            
            
            3,970
            
            
            --Provision
                for bad debts and sales reserve
            
            
            
            
            
            1,130,612
            
            
            --Gain
                on forfeiture of deferred compensation
            
            
            
            
            
            (118,050
            )
            
            --Impairment
                loss on license
            
            
            
            
            
            60,000
            
            
            --Estimated
                fair value of common stock issued to consultants for
                services
            
            
            
            
            
            17,360,804
            
            
            6,358,420Estimated
                fair value of common stock issued to employees and directors for
                services
            
            
            
            
            
            1,865,381
            
            
            307,500Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            
            
            
            (1,633,272
            )
            
            --Inventories
            
            
            
            
            
            (406,008
            )
            
            --Increase
                in inventory reserve
            
            
            
            
            
            25,834
            
            
            --Prepaid
                expenses and other current assets
            
            
            
            
            
            565
            
            
            1,449Other
                assets and prepaid royalties
            
            
            
            
            
            539,668
            
            
            (3,439
            )Accounts
                payable and accrued expenses
            
            
            
            
            
            1,743,450
            
            
            204,031Deferred
                revenue
            
            
            
            
            
            100,323
            
            
            --Deferred
                rent
            
            
            
            
            
            5,257
            
            
            --Deferred
                salaries
            
            
            
            
            
            1,926
            
            
            178,627**Net
                cash used in operating activities**
            
            
            
            
            
            (5,115,073
            )
            
            (1,552,572
            )**Cash
                flows from investing activities:**Payments
                for trademarks and prepaid royalties
            
            
            
            
            
            (433,088
            )
            
            (31,996
            )Purchases
                of property and equipment
            
            
            
            
            
            (413,530
            )
            
            (37,473
            )**Net
                cash used in investing activities**
            
            
            
            
            
            (846,618
            )
            
            (69,469
            )**Cash
                flows from financing activities:**Debt
                issuance costs
            
            
            
            
            
            (41,000
            )
            
            --Borrowings
                from related party
            
            
            
            
            
            23,000
            
            
            --Contributed
                capital for settlement of consulting agreements
            
            
            
            
            
            --
            
            
            150,000Borrowings
                under notes payable
            
            
            
            
            
            408,284
            
            
            --Principal
                payments under notes payable
            
            
            
            
            
            (73,228
            )
            
            --Sale
                of stock warrants
            
            
            
            
            
            50
            
            
            --Proceeds
                from issuance of common and preferred stock, net of issuance
                costs
            
            
            
            
            
            5,266,117
            
            
            1,649,500**Net
                cash provided by financing activities**
            
            
            
            
            
            5,583,223
            
            
            1,799,500**Net (decrease)
                increase in cash**
            
            
            
            
            
            (378,468
            )
            
            177,459**Cash
                at beginning of period**
            
            
            
            
            
            393,433
            
            
            215,974**Cash
                at end of period**
            
            
            
            
            $
            14,965
            
            $
            393,433






*See
      report of independent registered public accounting firm and*


*accompanying
      notes to consolidated financial statements*


F-6




**LEFT
      BEHIND GAMES INC.**


**Consolidated
      Statements of Cash Flows (Continued)**


**(unaudited)**





**For
                the Year Ended**
              **March
                31,****2007**
            
            **2006****Supplemental
                disclosure of cash flow information:**Cash
                paid during the period for:Interest
            
            $
            1,074
            
            $
            --Income
                taxes
            
            $
            800
            
            $
            3,156**Supplemental
                disclosure of non-cash investing and financing
                activities:**Commitment
                to pay royalties under a license agreement
            
            $
            250,000
            
            $
            --Cancellation
                of stockholder note and related shares
            
            $
            100,000
            
            $
            --Issuance
                of common stock in exchange for notes receivable
            
            $
            --
            
            $
            100,000Issuance
                of note payable for financing of insurance policy
            
            $
            60,000
            
            $
            --Issuance
                of common stock as deferred financing costs in
              Connection
                with issuance of promissory notes
            
            $
            371,800
            
            $
            --Conversion
                of deferred compensation liabilities into common stock
            
            $
            580,713
            
            $
            --Amounts
                paid on behalf of the Company by a related party
            
            $
            50,000
            
            $
            --*See
                report of independent registered public accounting firm
                and*
              *accompanying
                notes to consolidated financial
                statements*


F-7


**LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
  **NOTE
        1 - ORGANIZATION AND BASIS OF PRESENTATION**
 
 **ORGANIZATION**
 
 In
        January 2006, Left Behind Games Inc. (collectively, “we”, “our,” the “Company”
or “LBG”) entered into an Agreement and Plan of Merger (the “Agreement”) with
        Bonanza Gold, Inc., a Washington corporation (“Bonanza”), wherein Bonanza
        acquired LBG through the purchase of our outstanding common stock on a “1 for 1”
exchange basis. Prior to the execution of the Agreement, on January 25, 2006,
        we
        effected a 2.988538 for 5 reverse stock split of both our common stock and
        preferred stock outstanding, resulting in 12,456,538 and 3,586,246 shares
        of
        common and preferred stock, respectively. Also prior to the execution of
        the
        Agreement, Bonanza effected a 1 for 4 reverse stock split, resulting in
        1,882,204 shares of common stock outstanding.
 
 Effective
        February 1, 2006, Bonanza exchanged 12,456,538 and 3,586,246 shares of its
        common and preferred stock, respectively, for an equal number of our common
        and
        preferred shares. The acquisition was accounted for as a reverse acquisition
        whereby the assets and liabilities of LBG were reported at their historical
        cost. Bonanza had nominal amounts of assets and no significant operations
        at the
        date of the acquisition.
  We
        were
        incorporated on August 27, 2002 under the laws of the State of Delaware for
        the
        purpose of engaging in the business of producing, distributing and selling
        video
        games and associated products. We recently completed the development of a
        video
        game based upon the popular *LEFT
        BEHIND* series
        of novels published by Tyndale House Publishers (“Tyndale”) and as of November
        2006 began commercially selling the video game to retail outlets nationwide.
 
 White
        Beacon, Inc., a Delaware Corporation (“White Beacon”), an entity beneficially
        owned and controlled by Troy Lyndon, our chief executive officer and Jeffrey
        Frichner, our former president, holds an exclusive worldwide license (the
        “License”) from Tyndale to develop, manufacture and distribute video games and
        related products based on the “ *LEFT
        BEHIND* SERIES”
of novels published by Tyndale. White Beacon has granted us a sublicense
        (the
“Sublicense”) to exploit the rights and fulfill the obligations of White Beacon
        under the License (see Note 7).
 
 **BASIS
        OF PRESENTATION**
 
 The
        accompanying consolidated financial statements include the accounts of Left
        Behind Games Inc. and, effective July 2005, include the accounts of LB Games
        Ukraine LLC (“LB Games Ukraine”), a variable interest entity of which we are the
        primary beneficiary. All intercompany accounts and transactions have been
        eliminated in the consolidated financial statements.
  Effective
        July 2005, we adopted FIN 46(R), *Consolidation
        of Variable Interest Entities* ,
        which
        resulted in the consolidation of LB Games Ukraine. LB Games Ukraine was
        established to provide software development and consulting services and is
        currently providing these services only to us. LB Games Ukraine is 85% owned
        by
        the Company’s Chief Executive Officer. Pursuant to the LB Games Ukraine
        operating agreement, our Chief Executive Officer is required to fund operations
        as needed in relation to his ownership interest in LB Games Ukraine. During
        the
        period ended March 31, 2006, we contributed approximately $5,600 to LB Games
        Ukraine on behalf of our Chief Executive Officer to provide working capital
        to
        LB Games Ukraine. This transaction was eliminated in consolidation.
 
 As
        LB
        Games Ukraine is currently providing software development services only to
        us
        and due to our history of providing on-going financial support to this entity,
        through consolidation we absorb all net losses of this variable interest
        entity
        in excess of the equity. LB Games Ukraine’s sole asset is cash which has an
        approximate balance of $2,600 at March 31, 2007. During the years ended March
        31, 2007 and 2006, we paid approximately $180,000 and $119,000, respectively,
        for software development services provided by LB Games Ukraine, all of which
        has
        been eliminated in consolidation.




F-8




**LEFT
      BEHIND GAMES INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**For
      the Years Ended March 31, 2007 and 2006**





**NOTE
        2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Principles
        of Consolidation**
 
 The
        accompanying consolidated financial statements include the accounts of LBG
        and,
        effective July 2005, include the accounts of LB Games Ukraine LLC (“LB Games
        Ukraine”), a variable interest entity in which LBG is the primary beneficiary.
        LB Games Ukraine is a related party created to improve control over software
        development with independent contractors internationally. All intercompany
        accounts and transactions have been eliminated in the consolidated financial
        statements.
 
 **Reverse
        Stock Split**
 
 Effective
        January 25, 2006, we effected a 2.988538 for 5 reverse stock split of our
        common and preferred stock outstanding.   All share and per share amounts
        have been retroactively restated for all periods presented to reflect the
        reverse stock split.
 
 **Risks
        and Uncertainties**
 
 We
        maintain our cash accounts with a single financial institution.  Accounts
        at this financial institution are insured by the Federal Deposit Insurance
        Corporation (“FDIC”) up to $100,000. At March 31, 2007 and 2006, we had balances
        of approximately $0 and $284,000, respectively, in excess of the FDIC insurance
        limit.
 
 **Use
        of Estimates**
 
 The
        preparation of consolidated financial statements in conformity with accounting
        principles generally accepted in the United States of America requires us
        to
        make estimates and assumptions that affect the reported amounts of assets
        and
        liabilities, disclosure of contingent assets and liabilities at the date
        of the
        financial statements and the reported amounts of revenues and expenses during
        the reporting period. Actual results could differ from those estimates.
 Our significant estimates include recoverability of prepaid
        royalties and long-lived assets, and the realizability of accounts
        receivable, inventories and deferred tax assets.
 
 **Software
        Development Costs**
 
 Research
        and development costs, which consist of software development costs, are expensed
        as incurred.  Software development costs primarily include payments made to
        independent software developers under development agreements.  Statement of
        Financial Accounting Standards ("SFAS") No. 86, *Accounting
        for the Cost of Computer Software to be Sold, Leased, or Otherwise
        Marketed* ,
        provides for the capitalization of certain software development costs incurred
        after technological feasibility of the software is established or for the
        development costs that have alternative future uses.  We believe that the
        technological feasibility of the underlying software is not established until
        substantially all product development is complete, which generally includes
        the
        development of a working model.  No software development costs have been
        capitalized to date.
 
 **Cost
        of Sales**
 
 Cost
        of sales consists of product costs, royalty expenses, license costs
        and inventory-related operational expenses.
  F-9
 
 **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 
 **Property
        and Equipment**
 
 Property
        and equipment is stated at cost.  Depreciation is computed using the
        straight-line method over the estimated useful lives of the related assets,
        which range from 3 to 5 years. Repairs and maintenance are charged to expense
        as
        incurred while improvements are capitalized.  Upon the sale or retirement
        of property and equipment, the accounts are relieved of the cost and the
        related
        accumulated depreciation, with any resulting gain or loss included in the
        consolidated statement of operations.
 
 **Intangible
        Assets**
 
 *License
        and Sublicense Agreements*
 
 The
        cost
        of the License and Sublicense agreements are amortized on a straight-line
        basis
        over their related terms (see Notes 6 and 7). In the year ended March 31,
        2007,
        we determined that $60,000 paid under a technology license was impaired since
        we
        concluded that we were not going to license that technology (see Note 16).
        As a
        result, we wrote off $60,000 related to the technology license which is included
        in research and development expense for the year ended March 31, 2007.
 
 *Trademarks*
 
 The
        cost
        of trademarks includes funds expended for trademark applications that are
        in
        various stages of the filing approval process. The trademark costs are being
        amortized on a straight-line basis over their estimated useful lives. During
        the
        year ended March 31, 2007, the Company recorded $2,766 of amortization expense
        related to its capitalized trademark costs.
 
 **Royalties**
 
 Royalty-based
        obligations with content licensors are either paid in advance and
        capitalized as prepaid royalties or are accrued as incurred and subsequently
        paid. These royalty-based obligations are generally expensed to cost of goods
        sold at the greater of the contractual rate or an effective royalty rate
        based
        on expected net product sales.
 
 Our
        contracts with some licensors include minimum guaranteed royalty payments
        which
        are recorded to expense and as a liability at the contractual amount when
        no
        significant performance remains with the licensor. Minimum royalty payment
        obligations are classified as current liabilities to the extent such royalty
        payments are contractually due within the next twelve months.
 
 Significant
        judgment is required to estimate the effective royalty rate for a particular
        contract. Because the computation of effective royalty rates requires us
        to
        project future revenue, it is inherently subjective as our future revenue
        projections must anticipate, for example, (1) the total number of titles
        subject to the contract, (2) the timing of the release of these titles,
        (3) the number of software units we expect to sell, and (4) future
        pricing.
 
 Our
        Sublicense agreement requires payments of royalties to the licensor.  The
        Sublicense agreement provides for royalties to be calculated as a specified
        percentage of sales and provides for guaranteed minimum royalty payments.
        Royalties payable calculated using the agreement percentage rates are
        being recognized as cost of sales as the related sales are recognized.
 Guarantees advanced under the Sublicense agreement are recorded as a
        component of cost of sales during the period in which the Company is
        contractually obligated to make minimum guaranteed royalty payments.
 
 During
        the year ended March 31, 2007, we recorded expense of $500,000 related to
        our minimum guarantee.
  F-10
  **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 **Long-Lived
        Assets**
 
 We
        review
        our long-lived assets for impairment whenever events or changes in circumstances
        indicate that the carrying amount of an asset may not be recoverable.
 Recoverability of assets to be held and used is measured by a comparison
        of the carrying amount of the assets to future net cash flows expected to
        be
        generated by the assets.  If the assets are considered to be impaired, the
        impairment to be recognized is measured by the amount by which the carrying
        amount exceeds the present value of estimated future cash flows.  As of
        March 31, 2007, we believe there is no impairment of our long-lived assets.
         There can be no assurance, however, that market conditions will not change
        or that there will be demand for our products, which could result in impairment
        of long-lived assets in the future.
 
 **Income
        Taxes**
 
 We
        account for income taxes under the provisions of SFAS No. 109, *Accounting
        for Income Taxes* .
         Under SFAS No. 109, deferred tax assets and liabilities are recognized for
        future tax benefits or consequences attributable to temporary differences
        between the financial statement carrying amounts of existing assets and
        liabilities and their respective tax bases. Deferred tax assets and liabilities
        are measured using enacted tax rates expected to apply to taxable income
        in the
        years in which those temporary differences are expected to be recovered or
        settled.  A valuation allowance is provided for significant deferred tax
        assets when it is more likely than not that such assets will not be realized
        through future operations.
 
 **Stock-Based
        Compensation**
 
 Effective
        April 1, 2006, the first day of our fiscal year 2007, we adopted the fair
        value
        recognition provisions of SFAS No. 123(R), *Share-Based*  *Payment* ,
        using
        the modified-prospective transition method. Under this transition method,
        compensation cost recognized in the year ended March 31, 2007 includes: (a)
        compensation cost for all share-based payments granted and not yet vested
        prior
        to April 1, 2006, based on the grant date fair value estimated in accordance
        with the original provisions of SFAS No. 123, *Accounting
        for Stock-Based Compensation* ,
        and (b)
        compensation cost for all share-based payments granted subsequent to March
        31,
        2006 based on the grant-date fair value estimated in accordance with the
        provisions of SFAS No. 123(R). SFAS No. 123(R) requires forfeitures to be
        estimated at the time of grant and revised, if necessary, in subsequent periods
        if actual forfeitures differ from those estimates. Currently, no stock
        options have been granted to employees. Therefore, we believe the adoption
        of SFAS No. 123(R) had an immaterial effect on the accompanying
        consolidated financial statements.
 
 We
        calculate stock-based compensation by estimating the fair value of each option
        using the Black-Scholes option pricing model. Our determination of the fair
        value of share-based payment awards is made as of the respective dates of
        grant
        using the option pricing model and that determination is affected by our
        stock
        price as well as assumptions regarding the number of subjective variables.
        These
        variables include, but are not limited to, our expected stock price volatility
        over the term of the awards and actual and projected employee stock option
        exercise behavior. The Black-Scholes option pricing model was developed for
        use
        in estimating the value of traded options that have no vesting or hedging
        restrictions and are fully transferable. Because employee stock options have
        certain characteristics that are significantly different from traded options,
        the existing valuation models may not provide an accurate measure of the
        fair
        value of our employee stock options. Although the fair value of employee
        stock
        options is determined in accordance with SFAS No. 123(R) using an option-pricing
        model, that value may not be indicative of the fair value observed in a willing
        buyer/willing seller market transaction. The calculated compensation cost,
        net
        of estimated forfeitures, is recognized on a straight-line basis over the
        vesting period of the option.
  F-11
  **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 
 **Stock-Based
        Compensation, continued**
 
 Stock-based
        awards to non-employees are accounted for using the fair value method in
        accordance with SFAS No. 123, and Emerging Issues Task Force (“EITF”) Issue
        No. 96-18, *Accounting
        for Equity Instruments that are issued to Other Than Employees
        for*  *Acquiring,
        or in Conjunction with Selling Goods or Services* .
        All
        transactions in which goods or services are the consideration received for
        the
        issuance of equity instruments are accounted for based on the fair value
        of the
        consideration received or the fair value of the equity instrument issued,
        whichever is more reliably measurable. The measurement date used to determine
        the fair value of the equity instrument issued is the earlier of the date
        on
        which the third-party performance is complete or the date on which it is
        probable that performance will occur.
 
 In
        accordance with EITF Issue No. 00-18, *Accounting
        Recognition for Certain Accounting Transactions Involving Equity Instruments
        Granted to Other Than Employees* ,
        an
        asset acquired in exchange for the issuance of fully vested, non-forfeitable
        equity instruments should not be presented or classified as an offset to
        equity
        on the grantor's balance sheet once the equity instrument is granted for
        accounting purposes. Accordingly, we record the fair value of the common
        stock
        issued for certain future consulting services as prepaid expenses in our
        consolidated balance sheet.
 
 **Basic
        and Diluted Loss per share**
 
 Basic
        loss per common share is computed by dividing net loss by the weighted average
        number of shares outstanding for the period.  Diluted loss per share is
        computed by dividing net loss by the weighted average shares outstanding
        assuming all potential dilutive common shares were issued.  Basic and
        diluted loss per share are the same for the periods presented as the effect
        of
        warrants and convertible deferred salaries on loss per share are anti-dilutive
        and thus not included in the diluted loss per share calculation. If such
        amounts
        were included in diluted loss per share, they would have resulted in weighted
        average common shares of 21,244,535 and 10,136,250 for the years ended
        March 31, 2007 and 2006, respectively.
 
 **Foreign
        Currency and Comprehensive Income**
 
 We
        have
        determined that the functional currency of LB Games Ukraine is the local
        currency of that company. Assets and liabilities of the Ukrainian subsidiary
        are
        translated into U.S. dollars at the period end exchange rates. Income and
        expenses, including payroll expenses, are translated at an average exchange
        rate
        for the period and the translation gain or loss is accumulated as a separate
        component of stockholders’ equity. We determined that the translation gain or
        loss did not have a material impact on our stockholders’ equity as of March 31,
        2007 and 2006. As a result, we have not presented a separate accumulated
        other
        comprehensive income (loss) on our consolidated balance sheets.
 
 Foreign
        currency gains and losses from transactions denominated in other than the
        respective local currencies are included in income. There were no foreign
        currency transactions included in income during the years ended March 31,
        2007
        and 2006.
 
 Comprehensive
        income includes all changes in equity (net assets) during a period from
        non-owner sources. The components of comprehensive income were not materially
        impacted by foreign currency gains or losses during the years ended March
        31,
        2007 and 2006.
 
 **Fair
        Value of Financial Instruments**
 
 Our
        financial instruments consist of cash, accounts receivable, accounts payable,
        related party advances, notes payable and accrued expenses. The carrying
        amounts of these financial instruments approximate their fair value due to
        their
        short maturities or based on rates currently available to the Company for
        notes
        payable.
  F-12
  **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
        31, 2007 and 2006**
 
 **Revenue
        Recognition**
 
 We
        evaluate the recognition of revenue based on the criteria set forth in Statement
        of Position ("SOP") 97-2, *Software
        Revenue Recognition* ,
        as
        amended by SOP 98-9, *Modification
        of SOP 97-2, Software Revenue Recognition, With Respect to Certain
        Transactions* and
        Staff
        Accounting Bulletin (“SAB”) No. 101, *Revenue
        Recognition in Financial Statements* ,
        as
        revised by SAB No. 104, *Revenue
        Recognition.* We
        evaluate revenue recognition using the following basic criteria and recognize
        revenue when all four of the following criteria are met:
 •
              Evidence
                  of an arrangement: Evidence of an agreement with the customer that
                  reflects the terms and conditions to deliver products must be present
                  in
                  order to recognize revenue.•
              Delivery:
                  Delivery is considered to occur when the products are shipped and
                  risk of
                  loss and reward have been transferred to the customer.•
              Fixed
                  or determinable fee: If a portion of the arrangement fee is not
                  fixed or
                  determinable, we recognize that amount as revenue when the amount
                  becomes
                  fixed or determinable.•
              Collection
                  is deemed probable: At the time of the transaction, we conduct
                  a credit
                  review of each customer involved in a significant transaction to
                  determine
                  the creditworthiness of the customer. Collection is deemed probable
                  if we
                  expect the customer to be able to pay amounts under the arrangement
                  as
                  those amounts become due. If we determine that collection is not
                  probable,
                  we recognize revenue when collection becomes probable (generally
                  upon cash
                  collection).
 
 Determining
        whether and when some of these criteria have been satisfied often involves
        assumptions and judgments that can have a significant impact on the timing
        and
        amount of revenue we report. For example, for multiple element arrangements,
        we
        must make assumptions and judgments in order to: (1) determine whether and
        when each element has been delivered; (2) determine whether undelivered
        products or services are essential to the functionality of the delivered
        products and services; (3) determine whether vendor-specific objective
        evidence of fair value (“VSOE”) exists for each undelivered element; and
        (4) allocate the total price among the various elements we must deliver.
        Changes to any of these assumptions or judgments, or changes to the elements
        in
        a software arrangement, could cause a material increase or decrease in the
        amount of revenue that we report in a particular period.
 
 *Product
        Revenue:* Product
        revenue, including sales to resellers and distributors (“channel partners”), is
        recognized when the above criteria are met. We reduce product revenue for
        estimated future returns, price protection, and other offerings, which may
        occur
        with our customers and channel partners.
 
 *Revenue
        from Sales of Consignment Inventory* .
        We have
        placed consignment inventory with certain customers. We receive payment from
        those customers only when they sell our product to the final consumers. We
        recognize revenue from the sale of consignment inventory only when we receive
        payment from those customers.
 
 *Shipping
        and Handling:* In
        accordance with EITF Issue No. 00-10, *Accounting
        for Shipping and Handling Fees and Costs* ,
        we
        recognize amounts billed to customers for shipping and handling as revenue.
        Additionally, shipping and handling costs incurred by us are included in
        cost of
        goods sold.
 
 We
        promote our products with advertising, consumer incentive and trade promotions.
        Such programs include, but are not limited to, cooperative advertising,
        promotional discounts, coupons, rebates, in-store display incentives, volume
        based incentives and product introductory payments (i.e. slotting fees).
        In
        accordance with EITF No. 01-09, *Accounting
        for Consideration Given by a Vendor to a Customer or Reseller of the Vendors
        Products,* certain
        payments made to customers by the Company, including promotional sales
        allowances, cooperative advertising and product introductory expenditures
        have
        been deducted from revenue. During the year ended March 31, 2007, we recorded
        a
        total of $89,112 under such types of arrangements.
 
 F-13
 **LEFT
          BEHIND GAMES INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
          31, 2007 and 2006**
 
  Recent
        Accounting Pronouncements
 
 In
        May
        2005, the Financial Accounting Standards Board (“FASB”) issued
        SFAS No. 154, *Accounting
        Changes and Error Corrections* ,
        which
        replaces APB Opinion No. 20, *Accounting
        Changes* ,
        and
        SFAS No. 3, *Reporting
        Accounting Changes in Interim Financial Statements* .
        SFAS No. 154 applies to all voluntary changes in accounting principle
        and requires retrospective application (a term defined by the statement)
        to
        prior periods’ financial statements, unless it is impracticable to determine the
        effect of a change. It also applies to changes required by an accounting
        pronouncement that does not include specific transition provisions.
        SFAS No. 154 is effective for accounting changes and corrections of
        errors made in fiscal years beginning after December 15, 2005. The Company
        adopted SFAS No. 154 as of the beginning of fiscal 2007 and the
        adoption of SFAS No. 154 did not have a material impact on its consolidated
        financial condition or results of operations.
 
 In
        July
        2006, the FASB issued FASB Interpretation No. 48, *Accounting
        for Uncertainty in Income Taxes—an interpretation of FASB Statement No.
        109* .
        This
        interpretation prescribes 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. This interpretation also provides guidance
        on de-recognition, classification, interest and penalties, accounting in
        the
        interim periods, disclosure and transition. The interpretation is effective
        for
        fiscal years beginning after December 15, 2006. We have not yet analyzed
        the
        impact this interpretation will have on our consolidated financial condition,
        results of operations, cash flows or disclosures.
 
 In
        September 2006, the FASB adopted SFAS No. 157, *Fair
        Value Measurements* .
        SFAS
        No. 157 establishes a framework for measuring fair value and expands disclosure
        about fair value measurements. Specifically, this standard establishes that
        fair
        value is a market-based measurement, not an entity specific measurement.
        As
        such, the value measurement should be determined based on assumptions the
        market
        participants would use in pricing an asset or liability, including, but not
        limited to assumptions about risk, restrictions on the sale or use of an
        asset
        and the risk of non-performance for a liability. The expanded disclosures
        include disclosure of the inputs used to measure fair value and the effect
        of
        certain of the measurements on earnings for the period. SFAS No. 157 is
        effective for fiscal years beginning after November 15, 2007. The Company
        has
        not yet determined the effect adoption of SFAS No. 157 will have on its
        financial position or results of operations.
 
 In
        September 2006, the SEC staff issued SAB No. 108, *Considering
        the Effects of Prior Year Misstatements when Quantifying Misstatements in
        Current Year Financial Statements* .
        SAB No.
        108 requires that registrants quantify errors using both a balance sheet
        and
        income statement approach and evaluate whether either approach results in
        a
        misstated amount that, when all relevant quantitative and quantitative factors
        are considered, is material. The adoption of this statement is not expected
        to
        have a material impact on our consolidated financial condition or results
        of
        operations.
  F-14
  **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 **Customer
        Concentrations**
  During
        the year ended March 31, 2007, one customer accounted for 46% of net
        sales.
  **NOTE
        3 - GOING CONCERN**
 
 The
        accompanying consolidated financial statements have been prepared in conformity
        with accounting principles generally accepted in the United States of America,
        which contemplate continuation of LBG as a going concern. We have started
        generating revenue but have incurred net losses of $26,084,107 and $8,608,526
        during the years ended March 31, 2007 and 2006, respectively, and had an
        accumulated deficit of $35,631,260 at March 31, 2007. In addition, we used
        cash
        in our operations of $5,115,073 and $1,552,572 during the years ended March
        31,
        2007 and 2006, respectively.
 
 Our
        ability to continue as a going concern is dependent upon our ability to generate
        profitable operations in the future and/or to obtain the necessary financing
        to
        meet our obligations and to repay the liabilities arising from normal business
        operations when they come due. We plan to continue to provide for our capital
        requirements by issuing additional equity securities. No assurance can be
        given
        that additional capital will be available when required or on terms acceptable
        to us. We also cannot give assurance that we will achieve significant revenues
        in the future. The outcome of these matters cannot be predicted at this time
        and
        there are no assurances that if achieved, we will have sufficient funds to
        execute our business plan or generate positive operating results.
 
 These
        matters, among others, raise substantial doubt about the ability of LBG to
        continue as a going concern.  These consolidated financial statements do
        not include any adjustments to the amounts and classification of assets and
        liabilities that may be necessary should we be unable to continue as a going
        concern.
 
 **NOTE
        4 - INVENTORIES**
 
 Inventories
        consisted of the following at March 31, 2007:
 2007Raw
                    Materials
                
                $
                318,623Finished
                    Goods
                
                
                61,551Total
                    Inventories
                
                $
                380,174
  There
        were no inventories at March 31, 2006.
  F-15
  **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 **NOTE
        5 - PROPERTY AND EQUIPMENT**
 
 Property
        and equipment consisted of the following at March 31, 2007 and
        2006:
 
 2007
              
              2006Office
                  furniture and equipment
              
              $
              66,985
              
              $
              6,304Leasehold
                  improvements
              
              
              187,413
              
              
              2,071Computer
                  equipment
              
              
              205,756
              
              
              43,073460,154
              
              
              51,448Less
                  accumulated depreciation
              
              
              (91,841
              )
              
              (9,363
              )$
              368,313
              
              $
              42,085


Depreciation
        expense for the year ended March 31, 2007 and 2006 was $83,332 and $7,962,
        respectively.
 
 **NOTE
        6 - INTANGIBLE ASSETS**
 
 Intangible
        assets consisted of the following at March 31, 2007 and 2006:
 2007
                
                2006Sublicense
                
                $
                5,850
                
                $
                5,850Trademarks
                
                
                46,207
                
                
                35,27652,057
                
                
                41,126Less
                    accumulated amortization
                
                
                (8,616
                )
                
                (4,797
                )$
                43,441
                
                $
                36,329
 
 Amortization
        expense related to the Sublicense agreement was $3,819 and $1,404 for the
        years
        ended March 31, 2007 and 2006, respectively. Sublicense agreement is fully
        amortized at March 31, 2007. Trademarks are amortized on a straight-line
        basis
        over their lives. The estimated amortization expense of the trademarks is
        as
        follows:
  Fiscal
                  Year Eding March
                  31,
                
                Amount2007
                
                $
                2,7662008
                
                
                2,7662009
                
                
                2,7662010
                
                
                2,7662011
                
                $
                2,766
  **NOTE
        7 - RELATED PARTY TRANSACTIONS**
 
 On
        October 11, 2002, Tyndale granted White Beacon an exclusive worldwide license,
        as amended, to use the copyrights and trademarks relating to the storyline
        and
        content of the books in the *LEFT
        BEHIND* series
        of novels for the manufacture and distribution of video game products for
        personal computers, CD-ROM, DVD, game consoles, and the Internet. The License
        was initially set to expire on December 31, 2006, subject to automatic renewal
        for three additional three-year terms so long as Tyndale was paid royalties
        in
        an aggregate amount equal to or in excess of $1,000,000 during the initial
        term
        and $250,000 during each renewal term.
  F-16
  **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 The
        License requires White Beacon to pay the following royalties: (i) 4% of the
        gross receipts on console game platform systems and (ii) 10% of the gross
        receipts on all non-electronic products and for electronic products produced
        for
        use on personal computer systems. White Beacon was required to guarantee
        a
        minimum royalty of $250,000 during the initial four-year term of the License.
        White Beacon was also required to pay $100,000 to Tyndale as an advance against
        future royalties payable to Tyndale under the License agreement, all of which
        was paid by the Company in fiscal 2003 (see below).
 
 On
        November 14, 2002, White Beacon granted LBG a Sublicense of all of its rights
        and obligations under its License with Tyndale, with the written approval
        of
        Tyndale. In consideration for receiving the Sublicense, we issued to White
        Beacon 3,496,589 shares of our common stock valued at $5,850, which was the
        estimated fair value of the common stock on the date of issuance.
 
 During
        the year ended March 31, 2003, we paid $100,000 to Tyndale as a non-refundable
        advance against the guaranteed minimum royalty of $250,000 payable to Tyndale
        during the initial four-year term. We accrued the remaining guaranteed
        minimum royalty of $150,000 which was included in current liabilities in
        the accompanying consolidated balance sheet at March 31, 2006 and was paid
        in October 2006.
 
 In
        September 2006, the License was amended and extended to December 31, 2009
        after
        which it is subject to automatic renewals for additional three year terms
        if we
        have paid and/or prepaid royalties of $250,000 during each renewal period.
        As
        part of this amendment, we were required to pay Tyndale the remaining $750,000
        of the agreed original minimum royalty payment on or before March 31,
        2007.
 
 The
        license was further amended on May 14, 2007. Under this amendment the remaining
        amount of the minimum royalty payment was reduced from $750,000 to $250,000
        and
        the date of that payment was extended from March 31, 2007 to December 31,
        2007.
        We have recorded the financial impact of this amendment on the March 31,
        2007
        financial statements.
 
 As
        LB
        Games Ukraine is currently providing software development services only to
        us
        and due to our history of providing on-going financial support to that
        entity, through consolidation we absorb all net losses of this variable interest
        entity in excess of the equity. LB Games Ukraine’s sole asset is cash which
        has a balance of $2,559 at March 31, 2007. During the year ended March 31,
        2007, we paid $138,971 for software development services provided by LB
        Games Ukraine, which has been recorded as research and development
        cost during the period.
 
 At
        various times between December 2006 and March 2007, several of our executives
        advanced us funds to help us with our working capital requirements. These
        advances were non-interest bearing and have been classified as a current
        liability in the accompanying consolidated balance sheet as of March 31,
        2007.
        At March 31, 2007, $23,000 was owed to one of our former officers.
 
 During
        2007, the Company determined it owed its chief executive officer a total
        of
        $50,000 as part of a capital transaction that was entered into during a prior
        period. As of March 31, 2007, the balance was $50,000 and is included in
        advances from related party in the accompanying consolidated balance
        sheet.
 
  F-17
  **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 **NOTE
        8 - CONVERTIBLE DEFERRED SALARIES**
 
 As
        of
        March 31, 2007 and 2006, we had $0 and $696,836, respectively, of deferred
        salaries due to our officers.  The deferred salaries, at the option of the
        respective officers, were convertible into shares of our common stock at
        the
        value of the common stock in effect at the time the salary was earned.  
During the year ended March 31, 2007, $16,169 of deferred salaries were paid
        out
        to an officer while $18,096 of deferred salaries, convertible at $1.50
        per share, accrued to other officers. Also, under a separation agreement,
        deferred salaries relating to a former employee were cancelled, which resulted
        in a gain on forfeiture of deferred compensation of $118,050. That gain was
        booked into general and administrative expenses.
 
 During
        the year ended March 31, 2007, the holders of the deferred compensation elected
        to convert all of their deferred salaries into 5,902,438 common shares.
 
 **NOTE
        9 - INCOME TAXES**
 
 The
        provision for income taxes consists of the following for the years ended
        March
        31:
  **2007**
              
              **2006**Current:Federal
              
              $
              -
              
              $
              -State
              
              
              800
              
              
              800800
              
              
              800Deferred:Federal
              
              
              1,956,000
              
              
              623,000State
              
              
              486,000
              
              
              106,0002,442,000
              
              
              729,000Less
                  change in valuation allowance
              
              
              (2,442,000
              )
              
              (729,000
              )-
              
              
              -$
              800
              
              $
              800
  No
        current provision for federal income tax is required for the years ended
        March
        31, 2007 and 2006, since the Company incurred net operating losses through
        March
        31, 2007.
  F-18
  **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 The
        tax
        effect of temporary differences that give rise to significant portions of
        the
        deferred tax asset at March 31, 2007 and 2006 are presented below:
  **2007**
              
              **2006**Deferred
                  tax assets:Net
                  operating loss carryforwards
              
              $
              3,031,000
              
              $
              826,000Deferred
                  salaries
              
              
              17,000
              
              
              277,000Allowance
                  for doubtful accounts
              
              
              452,000
              
              
              --Deferred
                  rent
              
              
              2,000
              
              
              --Depreciable
                  and amortizable assets
              
              
              3,000
              
              
              --Deferred
                  tax liability:Unearned revenue
              
              
              40,000
              
              
              --3,545,000
              
              
              1,103,000Less
                  valuation allowance
              
              
              (3,545,000
              )
              
              (1,103,000
              )Net
                  deferred tax assets
              
              $
              --
              
              $
              --
  The
        provision for income taxes for both fiscal 2007 and 2006 was $800, respectively,
        and differs from the amount computed by applying the U.S. federal income
        tax
        rate of 34% to loss before income taxes as a result of the
        following:
  **2007**
              
              **2006**Computed
                  tax benefit at federal statutory rate
              
              $
              (8,746,000
              )
              $
              (2,927,000
              )State
                  income tax benefit, net of federal effect
              
              
              500
              
              
              (495,000
              )Increase
                  in valuation allowance
              
              
              2,442,000
              
              
              729,000Non-deductible
                  stock compensation
              
              
              6,526,000
              
              
              2,690,900Other
              
              
              (221,700
              )
              
              2,900$
              800
              
              $
              800
 
 As
        of
        March 31, 2007, the Company had net operating loss carryforwards of
        approximately $14,970,000 available to offset future taxable Federal and
        state
        income. The Federal and state net operating loss carryforwards expire at
        various
        dates through 2027 and 2017, respectively.
 
 Section
        382 of the Internal Revenue Code may limit utilization of the Company’s federal
        and California net operating loss carryforwards upon any change in control
        of
        the Company.
 
 **NOTE
        10 - STOCKHOLDERS’ EQUITY**
 
 **Common
        Stock**
 
 We
        are
        authorized to issue 200,000,000 shares of common stock, $0.001 par value
        per
        share.  The holders of our common stock are entitled to one vote per share
        of common stock held and have equal rights to receive dividends when, and
        if,
        declared by our Board of Directors, out of funds legally available therefore,
        subject to the preference of any holders of preferred stock.  In the event
        of liquidation, holders of common stock are entitled to share ratably in
        the net
        assets available for distribution to stockholders, subject to the rights,
        if
        any, of holders of any preferred stock then outstanding.  Shares of common
        stock are not redeemable and have no preemptive or similar
        rights.
  F-19
  **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 During
        the fiscal year ended March 31, 2006, we issued 1,276,975 shares of common
        stock
        for net proceeds of $1,649,500. We also issued 59,771 shares of our common
        stock
        in exchange for a $100,000 note receivable, which was cancelled in fiscal
        2007
        and the related shares were returned.
 
 During
        the fiscal year ended March 31, 2006, we issued 4,987,908 shares of common
        stock
        and warrants for services provided by independent third parties, valued at
        $7,438,343 based on the closing price of our common stock on the respective
        grant dates.
  During
        the fiscal year ended March 31, 2006, we issued 206,219 shares of common
        stock,
        valued at $307,500 to certain employees as additional compensation based
        on the
        closing price of our common stock on the respective grant dates.
 
 In
        January 2006, we entered into an Agreement and Plan of Merger (the “Agreement”)
        with Bonanza Gold, Inc., a Washington corporation (“Bonanza”), wherein Bonanza
        acquired the Company through the purchase of the Company’s outstanding common
        stock on a “1 for 1” exchange basis. Prior to the execution of the Agreement, on
        January 25, 2006, we effected a 2.988538 for 5 reverse stock split of both
        its
        common stock and preferred stock outstanding, resulting in 12,456,538 and
        3,586,246 shares of common and preferred stock, respectively. Also prior
        to the
        execution of the Agreement, Bonanza effected a 1 for 4 reverse stock split,
        resulting in 1,882,204 shares of common stock outstanding.
 
 In
        January 2007, we instituted the Left Behind Games Inc. 2006 Stock Incentive
        Plan
        (the “Plan”). The purpose of the Plan is to encourage and enable officers,
        directors, and employees of Left Behind Games Inc. (the "Company") and its
        Subsidiaries and other persons to acquire a proprietary interest in the Company.
        It is anticipated that providing such persons with a direct stake in the
        Company's welfare will assure a closer identification of their interests
        with
        those of the Company and its shareholders, thereby stimulating their efforts
        on
        the Company's behalf and strengthening their desire to remain with the Company.
        The Plan is for 2,500,000 shares, which can be issued in a number of forms
        including direct stock issuances and stock options. We registered the Plan
        under
        an S-8 registration statement in January 2007.
 
 During
        the fiscal year ended March 31, 2007, we issued 4,917,009 shares of common
        stock
        for net proceeds of $5,266,117. Related to the proceeds we incurred offering
        costs of cash commissions of $426,686, shares of common stock valued at $94,200;
        and 174,738 warrants valued at $287,296 (See Note 11).
 
 During
        the fiscal year ended March 31, 2007, we issued 8,389,887 shares of common
        stock
        and warrants for services provided by independent third parties, valued at
        $13,813,804 (based on the closing price of our common stock on the respective
        grant dates).
 
 During
        the fiscal year ended March 31, 2007, we issued 576,666 shares of common
        stock,
        valued at $1,865,381 (based on the closing price of our common stock on the
        respective issuance date), to certain employees and directors as additional
        compensation.
 
 In
        prior
        periods, we issued shares of common stock to consultants for service
        contracts. During the fiscal years ended March 31, 2007 and 2006, we amortized
        a
        total of $3,515,000 and $4,755,727, respectively, to consulting expense
        related to these service contracts.
 
 During
        the year ended March 31, 2007, we issued 5,902,438 shares of common stock
        valued
        at $580,713 to officers upon conversion of deferred salaries liabilities
        (See
        Note 8).
 
 During
        the year ended March 31, 2007, we issued 880,000 shares of common stock valued
        at $403,000 to investors and investment bankers in a bridge financing.
  F-20
  **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 **Preferred
        Stock**
 
 We
        are
        authorized to issue 10,000,000 shares of preferred stock, $0.001 par value
        per
        share, of which all have been designated Series A preferred stock. The holders
        of the Series A preferred stock are entitled to one vote per share on all
        matters subject to stockholder vote. The Series A preferred stock is convertible
        on a one for one basis into our common stock at the sole discretion of the
        holder.  The holders of the Series A preferred stock have equal rights to
        receive dividends when, and if, declared by our Board of Directors, out of
        funds
        legally available therefore. In the event of liquidation, holders of preferred
        stock are entitled to share ratably in the net assets available for distribution
        to stockholders.
  In
        November 2005, we issued 1,434,498 shares of series A preferred stock valued
        at
        $1.67 per share under a consulting agreement for total deferred consulting
        expense of $2,400,000 to be amortized over the term of the consulting agreement,
        of which $1,600,000 and $800,000 were recorded as consulting expense during
        the
        fiscal years ended March 31, 2007 and 2006, respectively. The amounts under
        the
        consulting agreements were fully amortized as of March 31, 2007.
 
 The
        holders of Series A preferred stock have a liquidation preference equal to
        the sum of the converted principal, accrued interest and value of converted
        common stock, aggregating $188,500 at March 31, 2007.
 
 **NOTE
        11 - STOCK WARRANTS**
 
 From
        time
        to time, we issue warrants pursuant to equity financing
        arrangements.
 
 The
        fair
        value of each warrant granted during the year ended March 31, 2007 to
        consultants and other service providers is estimated using the Black-Scholes
        option-pricing model on the date of grant using the following assumptions:
        (i)
        no dividend yield, (ii) volatility of 83% to 165%, (iii) weighted-average
        risk-free interest rates of 4.50% to 4.74%, and (iv) expected lives of three
        years.
 
 The
        following table represents a summary of the warrants outstanding at March
        31,
        2007 and 2006 and changes during the years then ended:
 
 2006
              
              2007Warrants
              
              Weighted
                  Average
                Exercise
                  Price
              
              Warrants
              
              Weighted
                  Average
                Exercise
                  PriceOutstanding,
                  beginning of year
              
              
              --
              
              
              $--
              
              
              --
              
              
              --Issued
              
              
              --
              
              
              --
              
              
              224,738
              
              
              $
                  2.07Expired/forfeited
              
              
              --
              
              
              --
              
              
              (50,000)
              
              
              $
                  1.50Exercised
              
              
              --
              
              
              --
              
              
              --
              
              
              --Outstanding
                  and exercisable, end of year
              
              
              --
              
              
              --
              
              
              174,738
              
              
              $
                  2.23Weighted
                  average fair value of warrants issued
              
              
              
              
              
              $ 
                  --
              
              
              
              
              
              $
                  2.86
  F-21
  **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 The
        following table summarizes information about warrants outstanding at March
        31,
        2007:
 
 Exercise
                  Price
              
              Number
                  of
                Warrant
                  Shares
              
              Weighted
                  Average
                Remaining
                Contractual
                  Life (Years)$2.25
              
              172,592
              
              2.17$0.50
              
              2,146
              
              2.76174,738
 
 The
        outstanding warrants at March 31, 2007 are immediately exercisable.
 
 **NOTE
        12 - COMMITMENTS AND CONTINGENCIES**
 
 **Guarantees
        and Indemnities**
 
 We
        have
        made certain indemnities and guarantees, under which we may be required to
        make
        payments to a guaranteed or indemnified party in relation to certain actions
        or
        transactions.  We indemnify our directors, officers, employees and agents,
        as permitted under the laws of the State of Delaware.  We have also
        indemnified our consultants, investment bankers, sublicensor and
        distributors against any liability arising from the performance of their
        services or license commitment, pursuant to their agreements.  In
        connection with our facility leases, we have indemnified our lessors for
        certain
        claims arising from the use of the facility.  The duration of the
        guarantees and indemnities varies, and is generally tied to the life of the
        agreement. These guarantees and indemnities do not provide for any limitation
        of
        the maximum potential future payments we could be obligated to make.
 Historically, we have not been obligated nor incurred any payments for
        these obligations and, therefore, no liabilities have been recorded for these
        indemnities and guarantees in the accompanying consolidated balance
        sheets.
 
 **Employment
        Agreements**
 
 We
        have
        entered into employment agreements with certain of our key employees.  Such
        contracts provide for minimum annual salaries and are renewable annually.
         In the event of termination of certain employment agreements by LBG
        without cause, we would be required to pay continuing salary payments for
        specified periods in accordance with the employment contracts.
 
 **Leases**
 
 In
        June
        2006, the Company entered into a non-cancelable operating lease for its
        corporate facility in Murrieta, California which expires on May 31, 2010.
        The
        terms of the lease require initial monthly rents of $7,545 and escalate at
        4%
        annually through lease expiration.  In October 2006, we entered into a
        three year lease to rent 3,500 square feet of additional space in Murrieta,
        California at $3,920 per month. This additional space is being used for both
        administrative, sales and warehouse purposes. For the fiscal years ended
        March
        31, 2007 and 2006, we recorded approximately $109,000 and $50,000, respectively,
        of rent expense.
  Future
        minimum monthly payments due under these leases are as follows:
 Year
                    Ending March 31,2008
                
                $
                134,8852009
                
                
                140,0532010
                
                
                126,6232011
                
                
                16,974$
                418,535  F-22
 **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 **Independent
        Sales Representatives**
 
 In
        order
        to help us secure retail distribution of our initial product, we entered
        into
        consulting arrangements with several independent representatives. The payment
        arrangements to these independent representatives are based upon the ultimate
        amount paid to us by the retail customers. The commission rates for these
        independent representatives typically vary from three percent to five percent
        of
        the net amount we collect from the retail customer. We have accrued commissions
        payable of approximately $2,300 based on funds collected.
  **Music
        Licenses**
 
 In
        April
        2006, we entered into a license agreement with a record company for the use
        of
        certain music recordings to be used in connection with our game production.
        The
        license agreement requires us to pay royalties to the record company at a
        rate
        of $0.10 per unit ($0.05 per unit for the master license and an additional
        $.05
        per unit for the performance license) and also requires the payment of other
        fees. The agreement remains in effect for two years.  We have
        calculated and accrued the amount due to this licensor as of March 31, 2007
        and
        recorded that provision for licensing fees to cost of goods sold. In May
        2007,
        this arrangement was subsequently modified to $0.025 for the master license
        and
        $0.025 for the performance license (see Note 16 - Subsequent Events). We
        have
        accrued license fees relating to this arrangement of approximately $47,000,
        of
        which $25,000 has been paid, and charged that expense to our cost of sales
        during the year ended March 31, 2007.
 
 In
        November 2006, we also entered into an agreement with a second record company
        for the use of certain music recordings to be used in connection with our
        game
        production. That license agreement also requires us to pay royalties to the
        record company at a rate of $0.10 per unit ($0.05 per unit for the master
        license and an additional $.05 per unit for the performance license) and
        remains
        in effect for three years. We have accrued license fees relating to this
        arrangement of approximately $10,000, of which $5,000 has been paid, and
        charged
        that expense to our cost of sales during the year ended March 31, 2007.
 
 **Investment
        Banking Services Agreements**
 
 In
        December 2005, we entered into a selling agreement with Great Eastern Securities
        (“Great Eastern”), a NASD registered broker dealer, whereby Great Eastern became
        the Company’s investment banker for the purpose of raising a minimum investment
        of $500,000, up to a maximum of $5,000,000. The agreement was originally
        set to
        expire on October 31, 2006. We issued Great Eastern 50,000 shares of common
        stock for their services during fiscal year ended March 31, 2007. The value
        of
        the shares, totaling $75,000, was recorded as consulting expense and was
        included in selling, general and administrative expenses during the fiscal
        year
        ended March 31, 2007. Effective July 31, 2006, the agreement with Great Eastern
        was extended through October 31, 2006. In addition to extending the original
        engagement agreement term, we also agreed to issue an additional 200,000
        shares of common stock to Great Eastern as additional consideration, valued
        at
        $699,000, which has been recorded as consulting expense and included in selling,
        general and administrative expense during the fiscal year ended March 31,
        2007.
 
 The
        responsibilities of Great Eastern were limited to introducing potential
        investors to us and they did not have the authority to offer to sell or sell
        any
        of our securities or debt instruments. Under the agreement with Great Eastern,
        we paid them a fee of $50,000, a commission of 10% of proceeds
        received under the arrangement and a non-accountable expense allowance that
        is equal to 3% of the gross funds that we received from equity investments
        that
        arose out of introductions made by Great Eastern. During the fiscal year
        ended
        March 31, 2007, we recorded total cash commissions to Great Eastern of $410,566,
        which have been netted against the proceeds received under that
        arrangement.
  F-23
 
 **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 Also,
        under the terms of the agreement, we issued to Great Eastern warrants to
        purchase shares of our common stock equal to 10% of the gross proceeds divided
        by the closing price of our common stock on the date on which the transaction
        is
        consummated. The exercise price is equal to 150% of the average per share
        price
        of the corresponding equity transaction. As of March 31, 2007, we have issued
        169,245 warrants to Great Eastern. Using the Black-Sholes option pricing
        model,
        using the assumptions noted below, the Company has determined the estimated
        fair
        value of those warrants to be $270,928, which has been recorded as offering
        costs in additional paid-in capital for the fiscal year ended March 31, 2007.
 
 Additionally,
        during the fiscal year ended March 31, 2007, we entered into agreements
        with three NASD registered broker dealers, Barron Moore, Inc. (“Barron Moore”),
        Dinosaur Securities, LLC (“Dinosaur”) and Bathgate Capital Partners
        (“Bathgate”). The terms of these agreements were similar to the agreement with
        Great Eastern. The warrants issued to Barron Moore and Bathgate have the
        same exercise price as the Great Eastern warrants while Dinosaur received
        warrants with a $1.50 exercise price but they paid us a nominal upfront cash
        payment for their warrants which was recorded as additional paid-in capital.
        On
        March 26, 2007, we agreed with Dinosaur to cancel their arrangement of 50,000
        previously issued warrants with an exercise price of $1.50 per share. As
        part of
        that cancellation, we agreed to issue Dinosaur 60,000 shares of our stock
        valued
        at $19,200, which has been included in consulting expense during fiscal 2007,
        and Dinosaur agreed to cancel their warrant.
 
 As
        of
        March 31, 2007, 5,493 warrants were outstanding with Barron Moore and Bathgate.
        Using the Black-Sholes option pricing model, assuming an expected exercise
        term
        of 3 years, a risk-free rate of 4.62-4.74% and estimated volatility of 151-165%,
        we have determined the estimated fair value of those warrants to be $16,368
        which has been recorded as offering costs.
 
 The
        following table is a recap of capital that we raised, commissions paid and
        warrants issued to Barron Moore, Bathgate and Great Eastern:
 
 Gross
                Capital
                  Raised
              
              Cash
                Commissions
                Earned
              
              Warrants
                IssuedBarron
                  Moore
              
              $
              70,000
              
              $
              9,100
              
              
              1,893Bathgate
              
              
              54,000
              
              
              7,020
              
              
              3,600Great
                  Eastern
              
              
              3,165,891
              
              
              410,566
              
              
              169,245Total
              
              $
              3,289,891
              
              $
              426,686
              
              
              174,738
  The
        $3,289,891 of gross capital shown in the above table was raised through the
        sale
        of approximately 1.9 million shares of our common stock to accredited investors
        from the efforts of our management and pursuant to the selling agreements
        with
        the investment banking firms.
  On
        October 9, 2006, we terminated the private placement offering to accredited
        investors of shares for sale at $1.50 per share.  In November 2006, we
        offered to three investors the right to rescind their investment under the
        previous private placement offering because their investments caused the
        offering to be oversubscribed. One of the three investors elected to rescind
        his
        investment of $35,000, which amount we returned in December 2006. We accounted
        for this rescission by reducing common stock and additional paid-in-capital
        by
        the amount recorded for his investment.
  F-24
  **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 **NOTE
        13 - NOTES PAYABLE**
 
 During
        the fiscal year ended March 31, 2007 we entered into several borrowing
        arrangements. The amounts borrowed under those arrangements are included
        in notes payable in the accompanying consolidated balance sheet.
 
 The
        following table is a recap of our notes payable outstanding as of March 31,
        2007:
 Financing
                    of insurance premiums
                
                $
                21,333Loan
                    from factor
                
                
                3,723Bridge
                    loan (see Note 15)
                
                
                320,000Short
                    term loan
                
                
                50,000Total
                    notes payable
                
                $
                395,056
  We
        entered into an insurance financing arrangement in November 2006. The insurance
        financing arrangement is unsecured, expires in November 2007, requires monthly
        principal payments of $5,333 and accrues interest at a rate of 9.3
        percent.
 
 In
        December 2006, we entered into an arrangement to factor our receivables.
        The
        arrangement with the factor is secured by certain accounts receivable that
        they
        have lent against and is intended to self liquidate as the factor collects
        those
        specific accounts receivable. The factoring arrangement carries a factoring
        fee
        of 7.0 percent of the funds advanced under the arrangement. During the year
        ended March 31, 2007, we factored a total of $38,284 under the arrangement.
        During the year ended March 31, 2007, we incurred $3,658 of interest expense
        under this arrangement.
 
 In
        March
        2007, we borrowed $50,000 under a short term loan arrangement from an investor
        through Southpointe Financial, an affilitate, a mortgage broker that is
        partially owned by one of our directors. We repaid the loan plus an agreed
        $10,000 in financing charges on April 5, 2007. We also issued 100,000 shares
        of
        our common stock to the director who arranged and personally guaranteed the
        short term loan. These shares were valued at $32,500 based on the closing
        price
        of our stock on that date and that amount was charged to expense.
  **NOTE
        14 - DEFERRED REVENUES**
 
 In
        July
        2006, we entered into a revenue share agreement with Double Fusion, an in-game
        advertising technology and service provider, under which Double Fusion will
        provide in-game advertising and product placement to go into our first video
        game product. Under this agreement, Double Fusion advanced $100,000 to us
        as an
        upfront deposit, which we received during the fiscal year ended March 31,
        2007.
        Under the agreement, Double Fusion will pay us 65% of net advertising revenues
        as our part of the revenue share related to in-game advertising placements
        that
        they sell. Once they have recouped $100,000 from our 65% revenue share, we
        will
        recognize this $100,000 upfront deposit as revenue. Until that time, we have
        classified this amount as deferred revenue in the current liabilities section
        of
        the accompanying balance sheet as of March 31, 2007.
  F-25
 
 **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 **NOTE
        15 - BRIDGE LOAN**
 
 In
        January 2007, we entered into a Bridge Loan arrangement with Meyers Associates
        L.P. (“Meyers”), a broker-dealer. Under this unsecured Bridge Loan arrangement
        we agreed to issue two shares of our common stock for every $1 lent to us
        by
        accredited investors (the “Bridge Units”). We also agreed to pay to the
        investors 10% simple interest on the funds lent to us and to pay Meyers a
        commission of 10% of proceeds received under the arrangement and a
        non-accountable expense allowance that is equal to 3% of the gross funds
        that we
        received. Meyers also received 25% shares coverage. We agreed to repay the
        Bridge Loan at the earlier of (i): twelve months after the date of
        issuance; (ii) the consummation of any $1.5 million financing; and
        (iii) the date on which the outstanding principal amount is prepaid in full
        The initial completion date of the Bridge Loan was March 31, 2007, which
        was
        subsequently extended to May 31, 2007 at which time it terminated.
 
 We
        agreed
        to provide the investors in this Bridge Offering the same registration rights
        provided to investors in our next private placement. In the event that a
        private
        placement is not completed at our election within 90 days from the completion
        of
        this Bridge Offering, we agreed to file with the SEC within 120 days from
        the
        final completion of this Bridge Offering a registration statement under the
        Securities Act of 1933, as amended concerning the resale of the shares of
        our
        Common Stock included in the Bridge Units.
 
 As
        of
        March 31, 2007, we received $273,500 in net proceeds (net of commissions
        and
        legal fees) under the Bridge Loan and the gross amount at that date that
        we will
        need to repay to the investors is $320,000. During the year ended March 31,
        2007, we recorded $2,904 of interest expense related to the agreed ten percent
        interest rate under the Bridge Loan. We paid Meyers cash commissions of $41,000
        on the amount funded.
 
 As
        of
        March 31, 2007, we issued 720,000 shares to the investors as part of the
        Bridge
        Units and 160,000 shares to Meyers as part of their compensation. We valued
        the
        720,000 shares issued to the investors at $296,800 based on the closing market
        price of our stock on the days in which the funding events occurred. We charged
        $38,467 of that amount to interest expense in the fiscal year ended March
        31,
        2007 and we will charge the remaining amount of $258,333 to interest expense
        over the remainder of the one year life of the Bridge Loan. The $258,333
        that
        will be charged to interest over the one year life of the loan is presented
        as
        capitalized financing costs on our March 31, 2007 consolidated balance sheet.
        The shares issued to Meyers were valued at $74,200 based on the closing market
        price of our stock and are being charged to interest expense over the term
        of
        the loan.
  In
        addition to the above, we issued 80,000 common shares
        to two investors in connection with a temporary advance before the first
        closing
        under the Bridge Loan. These shares were valued at $32,000.
 
 **NOTE
        16 - SUBSEQUENT EVENTS**
  Subsequent
        to March 31, 2007 and through July 12, 2007, we raised additional equity
        through
        the sale of our common stock to accredited investors. We raised $913,800
        in cash
        and a note for $25,000 from the sale of 9,388,000 shares of our common stock.
 
 Subsequent
        to March 31, 2007, we issued 1,196,949 shares of our common stock to independent
        third parties for services performed, valued at $291,442 (based on the closing
        price of our common stock on the respective grant dates).
 
 We
        also
        received approximately $130,000 in further gross proceeds under the Bridge
        Loan
        with Meyers (see Note 15). We issued 260,000 shares of common stock to the
        investors and 66,000 shares of common stock to Meyers as part of that bridge
        financing. We also paid Meyers cash commissions of $16,900 on this incremental
        financing amount.
  F-26
 
 **LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
 We
        paid
        off $21,000 that we owed to a former executive which we borrowed under an
        informal, non-interest bearing arrangement.
  On
        April
        30, 2007, we entered into a promissory note with our factor to payoff the
        remaining balance of $3,771 that was outstanding as of March 31, 2007 under
        the
        loan from factor. This amount was subsequently repaid.
 
 On
        June
        8, 2007, we entered into a separation agreement with Jeffrey S. Frichner
        under
        which he resigned as our president. Mr. Frichner remains a director.
 
 In
        May
        2007, we amended our In-Game Advertising Agreement with Double Fusion Inc.
        This
        amendment modified the revenue sharing arrangement between the parties so
        that
        the parties will share equally in any in-game advertising received until
        Double
        Fusion recoups the $100,000 that they advanced to us. Following Double Fusion
        recouping their $100,000 payment, we will then receive 85% of in-game
        advertising sales.
 
 In
        May
        2007, we agreed with the licensor of songs available on our game that the
        royalty on those songs would decline from ten cents per song to five cents
        per
        song. This adjustment was considered when calculating our cost of goods sold
        for
        the fiscal year ended March 31, 2007.
  F-27
  **INDEX
        TO EXHIBITS**
  (a) Exhibits:
 Exhibit 3.1
                Articles of Incorporation dated
                  March 29,
                  1961***Exhibit 3.2
                Amendment to Articles of Incorporation
                  dated
                  August 20, 1962***Exhibit 3.3
                Amendment to Articles of Incorporation
                  dated
                  October 17, 1977***Exhibit 3.4
                Amendment to Articles of Incorporation
                  dated
                  June 15, 1999***Exhibit 3.5
                Amended and Restated Articles of
                  Incorporation dated January 30, 2004***Exhibit 3.6
                Bylaws***Exhibit 10.1
                Share Exchange Agreement**Exhibit 10.2
                Employment Agreement with Troy A.
                  Lyndon**Exhibit 10.3
                Addendum dated June 2, 2004 to Employment
                  Agreement with Troy A. Lyndon**Exhibit 10.4
                Addendum dated February 1, 2005
                  to Employment
                  Agreement with Troy A. Lyndon**Exhibit 10.5
                Employment Agreement with Jeffrey
                  S.
                  Frichner**Exhibit 10.6
                Addendum dated June 2, 2004 to Employment
                  Agreement with Jeffrey S. Frichner**Exhibit 10.7
                Addendum dated February 1, 2005
                  to Employment
                  Agreement with Jeffrey S. Frichner**Exhibit 10.8
                Employment Agreement with Thomas
                  H.
                  Axelson**Exhibit 10.9
                Addendum dated June 2, 2004 to Employment
                  Agreement with Thomas H. Axelson**Exhibit 10.10
                Addendum dated February 1, 2005
                  to Employment
                  Agreement with Thomas H. Axelson**Exhibit 10.12
                Distribution Agreement with COKeM
                  InternationalExhibit 10.13
                Separation Agreement with Jeffrey
                  S.
                  Frichner*Exhibit 14.1
                Code of Ethics for Chief Executive
                  Officer
                  and Senior Financial Officers***Exhibit 31.1
                Certification of principal executive
                  officer
                  pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934,
                  as
                  amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley
                  Act of
                  2002Exhibit 31.2
                Certification of principal financial
                  officer
                  pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934,
                  as
                  amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley
                  Act of
                  2002Exhibit 32.1
                Certification of principal executive
                  officer
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002Exhibit 32.2
                Certification of principal financial
                  officer
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002
 ___________________
 *
          Incorporated by reference from Form 8-K filed on June 13, 2007
 
 **
          Incorporated by reference from Form 8-K filed on February 10, 2006
 
 ***
          Incorporated by reference from Form 10-SB filed on February 23,
          2004