**UNITED
        STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-KSB/A**




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
 ̈
      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  ̈ 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  ̈




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.   ̈




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act.) Yes  ̈ 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:   ̈




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.   ̈




State
      issuer’s revenues for its most recent fiscal year: $292,190




DOCUMENTS
      INCORPORATED BY REFERENCE -- Not applicable




Transitional
      Small Business Disclosure Format:  Yes  ̈  No x








**EXPLANATORY
      NOTE**





We
      are
      filing this Amendment No. 1 to our Annual Report on Form 10-KSB for the fiscal
      year ended March 31, 2007, originally filed with the Securities and Exchange
      Commission (the “SEC”) on July 16, 2007, to amend and restate our consolidated
      financial statements for the fiscal year ended March 31, 2007 related to the
      revenue recognition methodology for sales of our product.





As
      previously disclosed in our Current Report on Form 8-K dated November 19, 2007
      and filed on November 19, 2007 our incoming Board of Directors, upon the
      recommendations of management, and with the concurrence of our independent
      registered public accounting firm, concluded on November 19, 2007 that we needed
      to restate our historical financial statements for the fiscal year ended March
      31, 2007 and for the quarters ended December 31, 2006 and June 30,
      2007.





In
      connection with a routine periodic review by the SEC of our Form
      10-KSB for the fiscal year ended March 31, 2007, our management determined
      that
      our revenue recognition policies for sales of our product were not appropriate
      given the limited sales history of our product.  Historically, our
      revenue recognition policy was to record revenue upon shipment of product to
      our
      channel partners and direct customers then adjusted for a reserve to cover
      anticipated product returns and/or future price concessions.  After
      considering (i) the limited sales history of our product, (ii) the limited
      business history with our primary channel partner and largest retail customer
      and (iii) the competitive conditions in the software industry, our management
      determined that return privileges and price protection rights granted to our
      customers impacted our ability to reasonably estimate returns and future price
      concessions, and therefore, we were unable to conclude that our sales
      arrangements had a fixed and determinable price at the time our inventory was
      shipped to customers.  Furthermore, as part of the restatement
      process, we also determined that our largest retail customer had billed us
      for a
      $25,000 co-operative advertising campaign that we had not previously recorded
      as
      a reduction to our revenue.  In connection with the restatement, we
      deducted the $25,000 amount from our revenue in the fiscal year ended March
      31,
      2007.





A
      discussion of the restatement and its impact is set forth in Item 6,
      Management’s Discussion and Analysis or Plan of Operation and in Note 2 to the
      Consolidated Financial Statements included in this Amendment No. 1 on Form
      10-KSB.  Changes have also been made to the following items in this
      Amendment No. 1 on Form 10-KSB as a result of the restatement:





Part
      I


·
            Item
                1. “Description of Business”





Part
      II


·
            Item
                6. “Management’s Discussion and Analysis or Plan of
                Operation”


·
            Item
                7. “Consolidated Financial Statements and Supplementary
                Data”


·
            Item
                8A. “Controls and Procedures”





The
      Chief
      Executive Officer and the Chief Financial Officer of the Company have also
      reissued as part of this Amendment No. 1 on Form 10-KSB the certifications
      required by Sections 302 and 906 of the Sarbanes-Oxley Act of
      2002.  The reissued certifications are included in this Amendment No.
      1 on Form 10-KSB as Exhibits 31.1, 31.2, 32.1 and 32.2.





We
      also
      intend to amend our Quarterly Report on Form 10-QSB for the quarter ended June
      30, 2007 as originally filed with the SEC to correct the revenue recognition
      for
      sales of our product during that period, and to reflect the restatement of
      our
      unaudited quarterly financial information presented within that
      filing.  We will present the restated statements of operations and
      cash flows for the December 2006 period in our December 2007 Form
      10-QSB.





2





**TABLE
      OF
      CONTENTS**




Page**PART
                I**Item
                1.
            Description
                of Business
            5Item
                2.
            Description
                of Property
            17Item
                3.
            Legal
                Proceedings
            17Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            17**PART
                II**Item
                5.
            Market
                for Common Equity and Related Stockholder Matters
            18Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operation
            21Item
                7.
            Financial
                Statements
            27Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            28Item
                8A.
            Controls
                and Procedures
            28**PART
                III**Item
                9.
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate
                Governance; Compliance with Section 16(a) of the Exchange
                Act
            29Item
                10.
            Executive
                Compensation
            30Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            33Item
                12.
            Certain
                Relationships and Related Transactions and Director
                Independence
            34Item
                13.
            Exhibits
            35Item
                14
            Principal
                Accountant Fees and Services
            36**SIGNATURES**
            37Index
                to Consolidated Financial Statements
            F-1




3


**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.




4


**ITEM
      1.   DESCRIPTION OF BUSINESS**





This
      Form
      10-KSB/A of Left Behind Games Inc. (the “Company,” “LBG,” “we,” “us,” or “our”)
      reflects the restatement of our consolidated financial statements for the year
      ended March 31, 2007.





In
      addition to the description of our business, this Part I includes
      (i) a description of the process that led to our decision to restate our
      consolidated financial statements and (ii) an overview of the impact of the
      restatement on our previously filed financial results with the Securities and
      Exchange Commission, or the SEC. For a more complete description of the
      restatement and its impact, see Note 2 to the consolidated financial statements
      contained in this Form 10-KSB/A.





**Restatement**





On
      August 20, 2007, we received a comment letter from the SEC following a
      periodic review of our filings.  This comment letter largely dealt
      with our revenue recognition policies, particularly involving the sales of
      our
      games to channel partners and direct customers, as well as certain other
      matters.  The SEC asked us to consider whether we were able to make a
      reasonable estimate of sales returns and future price concessions during the
      year ended March 31, 2007 and the three month period ended June 30, 2007
      considering (i) the limited sales history of our product, (ii) the limited
      business history with our primary channel partner and (iii) the competitive
      conditions in the software industry.





As
      a
      result of the SEC’s inquiries, we reviewed all of our distribution channels and
      concluded that we should revise our revenue recognition policies to the
      following:





·
            For
                sales to our primary channel partner and largest retail customer,
                both of
                which have provided us with sell-through information, recognize revenues
                under a “sell-through” accounting
                methodology,


·
            For
                sales to our on-line store customers, recognize revenues after the
                expiration of the return privilege granted to our on-line customers
                which
                allows them to return unopened games for 30 days,
                and


·
            For
                sales to our Christian bookstore customers and all other customers,
                recognize revenues based on cash receipts since these customers do
                not
                provide us with sell-through information and we may allow product
                returns
                from these customers from time to
                time.





The
      incoming board of directors unanimously approved management’s
      recommendations.  As such, with the filing of this report, we are
      restating our consolidated financial statements for the fiscal year ended March
      31, 2007.





Historically,
      our revenue recognition policy was to record revenue upon shipment to our
      channel partners and direct customers then adjusted for a reserve to cover
      anticipated product returns and/or future price concessions, or the “ship-to
      method.” After further review and analysis, our management determined that the
      return privileges and price protection rights granted to our customers impacted
      our ability to reasonably estimate sales returns and future price concessions,
      especially given the recent introduction of our product and the lack of
      historical information on which to estimate sales returns and future price
      concessions.  Since we determined that we could not reasonably
      estimate sales returns and future price concessions at the time of shipment,
      we
      concluded that we were unable to determine that our sales arrangements had
      a
      fixed and determinable price at the time our inventory was shipped to customers,
      and therefore, revenue for our sales transactions could not be recognized upon
      shipment to the channel partners or direct customers.





For
      sales
      to our primary channel partner and most significant retail customer, we
      concluded that revenues should have been deferred until the resale of the
      products to the end customers, or the “sell-through method.”  For
      sales to our on-line store customers, revenues should have been deferred until
      such time as the right of return privilege granted to the customers lapsed,
      which is 30 days from the date of sale.  For sales to our Christian
      bookstore customers and all other customers, revenues should have been
      recognized on a cash receipts basis since these customers do not provide us
      with
      sell-through information and we may allow product returns from these customers
      from time to time. The impact on the consolidated financial statements for
      correcting these matters primarily resulted in recognizing deferred income
      on
      shipments until later periods and may in certain cases result in permanent
      reductions in revenue when revenue was previously recognized upon
      shipment.





In
      the
      future, we intend to continue using the sell-through methodology with our
      primary channel partners and significant retail customers that provide us with
      sell-through information.  We also intend to continue recognizing
      sales for our on-line store after a 30 day period to allow for the right that
      we
      have given our on-line customers to return unopened games for 30
      days.





5


Now
      that
      we have a year of sales history with our products, we are examining our sales
      returns and price concessions history with our Christian bookstore customers
      and
      all other customers that cannot provide us with sell-through
      information.  In future periods, we may elect to return to the accrual
      methodology of recording revenue for those customers upon shipment with reserves
      based upon our historical results.





During
      our review and analysis of the above revenue recognition policies, we also
      determined that our largest retail customer had subsequently billed us for
      a
      $25,000 co-operative advertising campaign that we had not previously recorded
      as
      a reduction to our revenue.  In connection with the restatement, we
      deducted the $25,000 amount from our revenue in the fiscal year ended March
      31,
      2007.





The
      adjustments that arose out of the revenue recognition changes described above
      resulted in a decrease in net revenues of $451,047 for the fiscal year ended
      March 31, 2007.  That $451,047 reduction combined with the additional
      $25,000 co-op charge reduced our previously reported net revenues to $292,190,
      compared to net revenues of $768,237 previously reported.





As
      a
      result of this revenue deferral, our cost of sales – product costs were reduced
      by $294,594 from the previously reported $598,530 to the restated amount of
      $303,936.





The
      net
      impact to our net loss arising out of this restatement was an increase of
      $181,453, or 0.7%, to $26,265,560, compared to the $26,084,107 loss previously
      reported for the fiscal year ended March 31, 2007.





The
      restatement adjustments did not result in any changes to our consolidated cash
      flows.





See
      Note
      2 to the consolidated financial statements contained in this Form 10-KSB/A
      for a
      more complete description of the restatement and the impact.





**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.





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”.





6


**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.





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.





**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.





7


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.





**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.





8


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.





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.





9


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.





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.





10


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.





**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.





11


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.





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.





12


**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.





**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.





13


**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.





**We
      identified a material weakness in internal control over financial reporting
      during fiscal year 2007.  If we fail to maintain an effective system
      of internal controls, we may not be able to report our financial results
      accurately, which may cause investors to lose confidence in our reported
      financial information and have an adverse effect on the price of our common
      stock.**





Management
      identified a material weakness in our internal controls over financial
      reporting.  We have not performed an evaluation of internal controls
      over financial reporting, as we are not currently required to comply with
      Section 404 of the Sarbanes-Oxley Act of 2002.  If such an evaluation
      had been performed or when we are required to perform such an evaluation,
      additional material weaknesses, significant deficiencies and other control
      deficiencies may have been or may be identified.  Although we are
      taking measures that we believe will remediate the material weakness, we cannot
      assure you that we have identified all, or that we will not in the future have
      additional, material weaknesses, significant deficiencies and control
      deficiencies.





Our
      independent registered public accounting firm has not been engaged to audit,
      nor
      has it audited, the effectiveness of our internal control over financial
      reporting.  Accordingly, our independent registered public accounting
      firm has not rendered an opinion on our internal control over financial
      reporting.  Our independent registered public accounting firm has not
      evaluated any of the measures we have taken, or that we propose to take, to
      address the material weakness discussed above.  The existence of
      material weaknesses could result in errors in our financial statements that
      could result in a restatement of financial statements, cause us to fail to
      meet
      our reporting obligations and cause investors to lose confidence in our reported
      financial information, leading to a decline in our stock price.





**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.





14


**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.





**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.





15


**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.





16


**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.





**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.






17


**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





**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.





18


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.





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:





19


—
            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.





**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.





20


**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.





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.





21


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.





**Restatement
      of Previously Issued Financial Statements**





As
      previously disclosed in our Current Report on Form 8-K dated November 19, 2007
      and filed on November 19, 2007 our Board of Directors, upon the recommendations
      of management, and with the concurrence of our independent registered public
      accounting firm, concluded on November 19, 2007 that we needed to restate our
      historical financial statements for the fiscal year ended March 31, 2007 and
      for
      the quarters ended December 31, 2006 and June 30, 2007.





In
      connection with a routine periodic review by the SEC of our Form 10-KSB for
      the
      fiscal year ended March 31, 2007, our management determined that our revenue
      recognition policies for sales of our product were not appropriate given the
      limited sales history of our product.  Historically, our revenue
      recognition policy was to record revenue upon shipment of product to our channel
      partners and direct customers then adjusted for a reserve to cover anticipated
      product returns and/or future price concessions.  After considering
      (i) the limited sales history of our product, (ii) the limited business history
      with our primary channel partner and largest retail customer and (iii) the
      competitive conditions in the software industry, our management determined
      that
      return privileges and price protection rights granted to our customers impacted
      our ability to reasonably estimate returns and future price concessions, and
      therefore, we were unable to conclude that our sales arrangements had a fixed
      and determinable price at the time our inventory was shipped to
      customers.  For sales to our primary channel partner and most
      significant retail customer, revenues should have been deferred until the resale
      of the products to the end customers, or the “sell-through
      method.”  For sales to our on-line store customers, revenues should
      have been deferred until such time as the right of return privilege granted
      to
      the customers lapsed, which is 30 days from the date of sale.  For
      sales to our Christian bookstore customers and all other customers, revenues
      should have been recognized on a cash receipts basis since these customers
      do
      not provide us with sell-through information and we may allow product returns
      from these customers from time to time. The impact on the consolidated financial
      statements for correcting these matters primarily resulted in recognizing
      deferred income on shipments until later periods and in certain cases permanent
      reductions in revenue when revenue was previously recognized upon
      shipment.





Furthermore,
      as part of the restatement process, we also determined that our largest retail
      customer had billed us for a $25,000 co-operative advertising campaign that
      we
      had not previously recorded as a reduction to our revenue.  In
      connection with the restatement, we deducted the $25,000 amount from our revenue
      in the fiscal year ended March 31, 2007.





Consequently,
      we have restated our consolidated balance sheet as of March 31, 2007 and the
      related consolidated statements of operations, stockholders’ deficit and cash
      flows for the year then ended. The following Management’s Discussion and
      Analysis or Plan of Operation gives effect to the restatement discussed Note
      2
      in *Notes to Consolidated Financial Statements*.




**RESULTS
      OF OPERATIONS**




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




*Net
      Revenues*




22


We
      recorded net revenues of $292,190 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.





*Cost
      of Sales - Product Costs*




We
      recorded cost of sales - product costs of $303,936 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.




*Selling,
      General and Administrative Expenses*




Selling,
      general and administrative expenses consist primarily of employee salaries
      and
      related costs, stock-based compensation to employees and consultants,
      advertising and public relations expenses associated with our product launch,
      and other general and administrative expenses.  The following table
      notes the principal components of our selling, general and administrative
      expenses in each of the fiscal years:


Fiscal
                Year Ended March 31,2007
            
            
            2006
            
            
            ChangeNon-cash
                payments to consultants
            
            $
            17,360,804
            
            
            $
            6,358,420
            
            
            $
            11,002,384Stock
                grants to employees
            
            
            1,865,381
            
            
            
            307,500
            
            
            
            1,557,881Advertising
                and public relations expenditures associated with the launch of our
                product
            
            
            1,217,962
            
            
            
            100,724
            
            
            
            1,117,238Employee
                salaries, including payroll taxes
            
            
            1,564,411
            
            
            
            398,965
            
            
            
            1,165,446Communications
                expense
            
            
            336,559
            
            
            
            47,004
            
            
            
            289,555Insurance
                expense
            
            
            164,100
            
            
            
            51,780
            
            
            
            112,320Travel
                and entertainment
            
            
            295,510
            
            
            
            128,736
            
            
            
            166,774All
                other general & administrative expenses
            
            
            1,611,629
            
            
            
            649,565
            
            
            
            962,064Total
                selling, general & administrative expenses
            
            $
            24,416,356
            
            
            $
            8,042,694
            
            
            $
            16,373,662





Selling,
      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%.  Selling, general and
      administrative expenses represented approximately 91% of our overall costs
      and
      expenses in the fiscal year ended March 31, 2007 compared to 93% in the fiscal
      year ended March 31, 2006.




Many
      of
      these selling, 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 $17,360,804 and $6,358,420,
      respectively. This represented an $11,002,384 increase during the year ended
      March 31, 2007. 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 stock-based compensation to
      consultants and employees was $12,560,265.




Other
      significant factors contributing to the increase in selling, general and
      administrative expenses were advertising 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 were $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.




23


The
      remainder of the increase was due to a variety of factors, including increases
      in salaries and related costs of $1,165,446 due to the hiring of additional
      employees, and increases in other general and administrative expenses due to
      the
      increase in expenditures due to the launch of our product during the third
      quarter of fiscal 2007.




*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 $26,265,560 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 $17,657,034.
      In addition, our accumulated deficit at March 31, 2007 totaled $35,812,713.
      These increases are attributable primarily to the factors discussed above.
      As
      noted above, $19,226,185, or 73%, 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
      $1,798,341 compared to a working capital position of $3,019,786 at March 31,
      2006.





*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
      $26,265,560 and $8,608,526,
      respectively, an increase of $17,657,034.





*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.




24


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 $35,812,713 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.





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.





25


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.





**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:


•
            Persuasive
                evidence of an arrangement exists: 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
                has occurred: Delivery is considered to occur when the products are
                shipped and risk of loss and reward have been transferred to the
                customer.•
            The
                seller’s price to the buyer is fixed and determinable: If an arrangement
                includes rights of return or rights to refunds without return, revenue
                is
                recognized at the time the amount of future returns or refunds can
                be
                reasonably estimated or at the time when the return privilege has
                substantially expired in accordance with SFAS No. 48, *Revenue
                Recognition When Right of Return Exists*.  If an arrangement
                requires us to rebate or credit a portion of our sales price if the
                customer subsequently reduces its sales price for our product to
                its
                customers, revenue is recognized at the time the amount of future
                price
                concessions can be reasonably estimated, or at the time of customer
                sell-through.•
            Collectibility
                is reasonably assured: 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).





26


After
      considering (i) the limited sales history of our product, (ii) the limited
      business history with our primary channel partner and largest retail customer
      and (iii) the competitive conditions in the software industry, we determined
      that return privileges and price protection rights granted to our customers
      impact our ability to reasonably estimate sales returns and future price
      concessions, and therefore, we are unable to conclude that our sales
      arrangements have a fixed and determinable price at the time our inventory
      is
      shipped to customers.  As a result, our revenue recognition
      policies are as follows.





For
      sales
      to our primary channel partner and largest retail customer, we defer revenue
      recognition until the resale of the products to the end customers, or the
“sell-through method.”  Under sell-through revenue accounting,
      accounts receivable are recognized and inventory is relieved upon shipment
      to
      the channel partner or retail customer as title to the inventory is transferred
      upon shipment, at which point we have a legally enforceable right to collection
      under normal terms. The associated sales and cost of sales are deferred by
      recording “deferred income – product sales” (gross profit margin on these sales)
      as shown on the face of the consolidated balance sheet. When the related product
      is sold by our primary channel partner or our largest retail customer to their
      end customers, we recognize previously deferred income as sales and cost of
      sales.  Our primary channel partner and largest retail customer each
      provide us with sell-through information on a frequent basis regarding sales
      to
      end customers and in-channel inventories.





For
      sales
      to our on-line store customers, revenues are deferred until such time as the
      right of return privilege granted to the customers lapses, which is 30 days
      from
      the date of sale for unopened games.





For
      sales
      to our Christian bookstore customers and all other customers that cannot provide
      us with sell-through information and for which we may accept product returns
      from time to time, revenues are recognized on a cash receipts
      basis.





In
      the
      future, we intend to continue using the sell-through methodology with our
      primary channel partner and largest retail customer.  We also plan to
      continue recognizing sales on our on-line store after a one month lag to allow
      for the right that we have given our on-line customers to return unopened games
      for 30 days.





We
      continue to accumulate historical product return and price concession
      information related to our Christian bookstore customers and all other
      customers.  In future periods, we may elect to return to the accrual
      methodology of recording revenue for those customers upon shipment with
      estimated reserves at which time we believe we can reasonably estimate returns
      and price concessions to these customers based upon our historical
      results.





*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 end 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
      $125,766 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.




27


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





Not
      applicable





**ITEM
      8A. CONTROLS AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures**





We  carried  out  an  evaluation,
      under the supervision and with the participation of our management, including
      our Chief Executive Officer and Chief Financial Officer, of the effectiveness
      of
      the design and operation of our disclosure controls and procedures pursuant
      to
      the Securities Exchange Act of 1934 Rule 13a-15. In the Company’s initial Annual
      Report on Form 10-KSB for the year ended March 31, 2007, the Chief Executive
      Officer and Chief Financial Officer concluded that as of the end of the period
      covered by this report our disclosure controls and procedures were effective
      to
      ensure that information  required to be disclosed in our reports filed
      or submitted under the Exchange Act is recorded, processed, summarized and
      reported within the time periods specified in the SEC's rules and forms, and
      are
      also effective to ensure that information required to be disclosed in our
      reports filed or submitted under the Exchange Act is accumulated and
      communicated to the Company's management, including the principal executive
      and
      principal financial officers, to allow timely decisions regarding required
      disclosure. As a result of this restatement, our Chief Executive Officer and
      Chief Financial Officer re-evaluated their previous conclusion and have now
      concluded that, as of the end of such period, the Company’s disclosure controls
      and procedures covered by this report were not effective as a result of a
      material weakness in internal controls as of March 31, 2007, as discussed
      below.





Notwithstanding
      the material weakness discussed below, our management has concluded that the
      consolidated financial statements included in this Annual Report on Form
      10-KSB/A fairly present in all material respects the Company's financial
      condition, results of operations and cash flows for the year ended March 31,
      2007 in conformity with accounting principles generally accepted in the United
      States of America.





***Effect
      of Restatement on Disclosure Controls***





As
      disclosed in our Form 8-K dated November 19, 2007, our incoming Board of
      Directors authorized us to amend and restate our consolidated financial
      statements and other financial information for the year ended March 31, 2007,
      and the quarters ended December 31, 2006 and June 30, 2007, after concluding
      that our former revenue recognition policies for sales of our product were
      not
      appropriate given the limited sales history of our products. See Note 2 to
      the consolidated financial statements included in this report for more
      information.





In
      connection with the restatement, our Chief Executive Officer and our Chief
      Financial Officer considered the effect of these matters on the adequacy of
      our
      disclosure controls and procedures as of the end of the period covered by this
      Annual Report on Form 10-KSB for the year ended March 31, 2007.  The
      certifying officers determined that disclosure controls and procedures were
      not
      effective as a consequence of the material weakness described
      below.





A
      material weakness is a control deficiency, or combination of control
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of the annual or interim financial statements will not be prevented
      or detected.  As a result of the restatement described above, the following
      material weakness was identified in the Company's assessment of the
      effectiveness of disclosure controls and procedures as of March 31,
      2007:





i)
            The
                Company did not maintain adequate internal controls over financial
                reporting due to the lack of appropriate technical review of its
                sales
                arrangements and revenue
                accounting.





As
      a
      result of this weakness, our management and board of directors is in the process
      of determining steps to improve internal controls related to these material
      weaknesses to ensure that the errors will not occur again and that our
      disclosure controls and procedures are operating at the reasonable assurance
      level.





***Changes
      in Internal Control over Financial Reporting***





In
      order
      to address and correct the material weakness identified above, management is
      currently in the process of reviewing and improving its revenue recognition
      procedures, documentation, and the surrounding internal
      controls.  There were no other changes in the Company’s internal
      control over financial reporting that occurred during the fourth quarter of
      fiscal 2007 that have materially affected, or are reasonably likely to
      materially affect, the Company’s internal control over financial
      reporting.





28





**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.





***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.




29


**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.





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.




30




*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.





***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.




31


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
            
            2007
            
            
            $
            150,000
            
            
            $
            --
            
            
            
            41,739
            (1)
            
            $
            191,739Chairman
                and Chief Executive Officer
            
            2006
            
            
            
            120,9732005
            
            
            
            71,944Jeffrey
                S. Frichner
            
            2007
            
            
            $
            143,800
            
            
            
            --
            
            
            
            49,729
            (2)
            
            $
            193,529Former
                President
            
            2006
            
            
            
            126,8782005
            
            
            
            110,792James
                B. Frakes
            
            2007
            
            
            $
            71,564
            *
            
            $
            131,475
            
            
            ****
            **--**
            
            
            $
            203,039Chief
              Financial OfficerKevin
                Hoekman
            
            2007
            
            
            $
            108,992
            *
            
            $
            554,000
            
            
            ****
            **--**
            
            
            $
            662,992Senior
                ProducerDavid
                Klein
            
            2007
            
            
            $
            88,846
            *
            
            $
            355,500
            
            
            ****
            **--**
            
            
            $
            444,346Former
                Senior Vice President


______________________


(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.




**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.





32


**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.





33


**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.




34


**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
                2002




35




Exhibit
                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





**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.




36


**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)




November
                  19, 2007
            By:
            /s/ James
              B. FrakesJames
              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
            
            TitleNovember
                19, 2007
            
            /s/
                TROY A. LYNDON
            
            Chairman,
                Chief Executive Officer, and Director(Troy
                A. Lyndon)
            
            (Principal
                Executive Officer)November
              19, 2007
            
            /s/
              JAMES B. FRAKES
            
            Chief
              Financial Officer(James
                B. Frakes)
            
            (Principal
              Accounting Officer and
              Principal Financial Officer)November
              19, 2007
            
            /s/
              MICHAEL KNOX
            
            Incoming
                Director(Michael
                Knox)November
                19, 2007
            
            /s/
              LESLIE BOCSKOR
            
            Incoming
                Director(Leslie
                Bocskor)




37


**LEFT
      BEHIND GAMES INC.**




**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 (restated) and 2006
            
            F-3Consolidated
                Statements of Operations for the years ended March 31, 2007 (restated)
                and
                2006
            
            F-4Consolidated
                Statements of Stockholders’ Equity (Deficit) for the years ended March 31,
                2007 (restated) and 2006
            
            F-5Consolidated
                Statements of Cash Flows for the years ended March 31, 2007 (restated)
                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.





As
      discussed in Note 2, the Company’s consolidated financial statements as of March
      31, 2007 and for the year then ended have been restated.





/s/
      KMJ
      Corbin and Company LLP





Irvine,
      California


July
      16,
      2007  (November 19, 2007 as to the effects of the restatement discussed in
      Note 2)




F-2


**LEFT
      BEHIND GAMES INC.**


**CONSOLIDATED
      BALANCE SHEETS**







**March
                31,**
            
            
            **March
                31,****2007**
            
            
            **2006****ASSETS**
            
            (Restated)(See
                Note 2)CURRENT
                ASSETS:Cash
            
            $
            14,965
            
            
            $
            393,433Accounts
                receivable,
                net of allowance for doubtful accounts of $68,825
            
            
            862,621
            
            
            
            --Inventories
            
            
            394,605
            
            
            
            --Debt
                issuance
                costs
            
            
            359,133
            
            
            
            --Prepaid
                royalties
            
            
            --
            
            
            
            250,000Prepaid
                consulting
            
            
            --
            
            
            
            3,515,000Other
                prepaid expenses
                and current assets
            
            
            38,846
            
            
            
            4,411Total
                current assets
            
            
            1,670,170
            
            
            
            4,162,844Property
                and equipment,
                net
            
            
            368,313
            
            
            
            42,085Intangible
                assets,
                net
            
            
            43,441
            
            
            
            36,329Other
                assets
            
            
            52,373
            
            
            
            3,439$
            2,134,297
            
            
            $
            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
                income –
                product sales
            
            
            555,845
            
            
            
            --Deferred
                revenue
            
            
            100,323
            
            
            
            --Total
                current liabilities
            
            
            3,413,896
            
            
            
            1,143,058Deferred
                rent
            
            
            5,257
            
            
            
            --Total
                liabilities
            
            
            3,419,153
            
            
            
            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
            
            
            (35,812,713
            )
            
            
            (9,547,153
            )Total
                stockholders' equity (deficit)
            
            
            (1,284,856
            )
            
            
            3,101,639$
            2,134,297
            
            
            $
            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**(Restated)(See
                Note 2)Net revenues
            
            $
            292,190
            
            
            $
            --Costs
                and expenses:Cost
                of sales - product costs
            
            
            303,936
            
            
            
            --Cost
                of sales - intellectual property licenses
            
            
            552,326
            
            
            
            --Selling,
                general
                and
                administrative
            
            
            24,416,356
            
            
            
            8,042,694Product
                development
            
            
            1,209,154
            
            
            
            568,001Total
                costs and expenses
            
            
            26,481,772
            
            
            
            8,610,695Operating
                loss
            
            
            (26,189,582
            )
            
            
            (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
            
            
            (26,264,760
            )
            
            
            (8,607,726
            )Provision
                for income
                taxes
            
            
            800
            
            
            
            800Net
                loss
            
            $
            (26,265,560
            )
            
            $
            (8,608,526
            )Net
                loss available to
                common stockholders per common share:Basic
                and diluted
            
            $
            (1.25
            )
            
            $
            (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 (restated)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (26,265,560
            )
            
            
            (26,265,560
            )**Balance,
                March 31, 2007 (restated)**
            
            
            3,586,245
            
            
            $
            3,586
            
            
            
            35,904,898
            
            
            $
            35,842
            
            
            $
            34,488,429
            
            
            $
            -
            
            
            $
            (35,812,713
            )
            
            $
            (1,284,856
            )




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**(Restated)(See
                Note 2)**Cash
                flows from operating activities:**Net
                loss
            
            $
            (26,265,560
            )
            
            $
            (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
            
            
            68,825
            
            
            
            --Provision
                for inventory reserve
            
            
            25,834
            
            
            
            --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
            
            
            (931,446
            )
            
            
            --Inventories
            
            
            (420,439
            )
            
            
            --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
                income – product sales
            
            
            555,845
            
            
            
            --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 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 year**
            
            
            393,433
            
            
            
            215,974**Cash
                at end of year**
            
            $
            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 year 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 8).





**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 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS**





As
      previously disclosed in our Current Report on Form 8-K dated November 19, 2007
      and filed on November 19, 2007 our incoming Board of Directors, upon the
      recommendations of management, and with the concurrence of our independent
      registered public accounting firm, concluded on November 19, 2007 that we needed
      to restate our historical financial statements for the fiscal year ended March
      31, 2007 and for the quarters ended December 31, 2006 and June 30,
      2007.





In
      connection with a routine periodic review by the U.S. Securities and Exchange
      Commision (the "SEC") of our Form 10-KSB for the fiscal year ended March 31,
      2007, our management determined that our revenue recognition policies for sales
      of our product were not appropriate given the limited sales history of our
      product.  Historically, our revenue recognition policy was to record
      revenue upon shipment of product to our channel partners and direct customers
      then adjusted for a reserve to cover anticipated product returns and/or future
      price concessions.  After considering (i) the limited sales history of
      our product, (ii) the limited business history with our primary channel partner
      and largest retail customer and (iii) the competitive conditions in the software
      industry, our management determined that return privileges and price protection
      rights granted to our customers impacted our ability to reasonably estimate
      returns and future price concessions, and therefore, we were unable to conclude
      that our sales arrangements had a fixed and determinable price at the time
      our
      inventory was shipped to customers.  For sales to our primary channel
      partner and most significant retail customer, revenues should have been deferred
      until the resale of the products to the end customers, or the “sell-through
      method.”  For sales to our on-line store customers, revenues should
      have been deferred until such time as the right of return privilege granted
      to
      the customers lapsed, which is 30 days from the date of sale.  For
      sales to our Christian bookstore customers and all other customers, revenues
      should have been recognized on a cash receipts basis since these customers
      do
      not provide us with sell-through information and we may allow product returns
      from these customers from time to time. The impact on the consolidated financial
      statements for correcting these matters primarily resulted in recognizing
      deferred income on shipments until later periods and in certain cases permanent
      reductions in revenue when revenue was previously recognized upon
      shipment.





Furthermore,
      as part of the restatement process, we also determined that our largest retail
      customer had billed us for a $25,000 co-operative advertising campaign that
      we
      had not previously recorded as a reduction to our revenue.  In
      connection with the restatement, we deducted the $25,000 amount from our revenue
      in the fiscal year ended March 31, 2007.





The
      following table presents the effects of the restatement adjustments on the
      accompanying consolidated financial statements as of and for the year ended
      March 31, 2007:




**As
                  Previously****Reported**
              
              
              **Restated**
              
              
              **Net
                  Adjustment****Consolidated
                  Statement of Operations**Net
                  revenues
              
              $
              768,237
              
              
              $
              292,190
              
              
              $
              (476,047
              )Cost
                  of sales – product costs
              
              
              598,530
              
              
              
              303,936
              
              
              
              (294,594
              )Total
                  costs and expenses
              
              
              26,776,366
              
              
              
              26,481,772
              
              
              
              294,594Operating
                  loss
              
              
              (26,008,129
              )
              
              
              (26,189,582
              )
              
              
              (181,453
              )Loss
                before provision for income taxes
              
              
              (26,083,307
              )
              
              
              (26,264,760
              )
              
              
              (181,453
              )Net
                  loss
              
              $
              (26,084,107
              )
              
              $
              (26,265,560
              )
              
              $
              (181,453
              )Net
                  loss per common share — basic and diluted
              
              $
              (1.24
              )
              
              $
              (1.25
              )
              
              $
              (0.01
              )





**As
                Previously****Reported**
            
            **Restated**
            
            **Net
                Adjustment****Consolidated
                Balance Sheet**Accounts
                receivable, net
            
            $
            502,660
            
            
            $
            862,621
            
            
            $
            359,961Inventories
            
            $
            380,174
            
            
            $
            394,605
            
            
            $
            14,431Total
                current assets
            
            $
            1,295,778
            
            
            $
            1,670,170
            
            
            $
            374,392Total
                assets
            
            $
            1,759,905
            
            
            $
            2,134,297
            
            
            $
            374,392Deferred
                income – product sales
            
            $
            —
            
            
            $
            555,845
            
            
            $
            555,845Total
                current liabilities
            
            $
            2,858,051
            
            
            $
            3,413,896
            
            
            $
            555,845Total
                liabilities
            
            $
            2,863,308
            
            
            $
            3,419,153
            
            
            $
            555,845Accumulated
                deficit
            
            $
            (35,631,260
            )
            
            $
            (35,812,713
            )
            
            $
            (181,453
            )Total
                stockholders' deficit
            
            $
            (1,103,403
            )
            
            $
            (1,284,856
            )
            
            $
            (181,453
            )Total
                liabilities and stockholders’ equity
            
            $
            1,759,905
            
            
            $
            2,134,297
            
            
            $
            374,392




F-9




**LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**




**As
                Previously****Reported**
            
            **Restated**
            
            **Net
                Adjustment****Condensed
                Consolidated Statement of Cash Flows**Net
                cash used in operating activities
            
            
            (5,115,073
            )
            
            
            (5,115,073
            )
            
            
            --Net
                cash used in investing activities
            
            
            (846,618
            )
            
            
            (846,618
            )
            
            
            --Increase
                in cash and cash equivalents
            
            
            5,583,223
            
            
            
            5,583,223
            
            
            
            --





The
      revenue restatement adjustments primarily resulted in revenue being deferred
      and
      recognized in subsequent periods.  The revenue restatement adjustments
      had a corresponding impact to cost of sales and relate principally to the same
      major reasons for which revenue was adjusted. The reasons for the revenue and
      cost of sales adjustments and the impact on net loss include the
      following:




**Net
                sales**
            
            
            **Cost
                of sales**
            
            
            **Gross
                Profit****Reasons
                for Adjustments**Impact
                from change in revenue recognition methodology
            
            
            (a)
            
            
            $
            (451,047
            )
            
            $
            (294,594
            )
            
            $
            (156,453
            )Recognition
                of additional co-op sales arrangement with a large retail
                customer
            
            
            (b)
            
            
            
            (25,000
            )
            
            
            --
            
            
            
            (25,000
            )Total
                adjustments
            
            
            
            
            
            $
            (476,047
            )
            
            $
            (294,594
            )
            
            $
            (181,453
            )




(a)
            
            Sales
                from distributors were deferred and will be recognized in subsequent
                periods due to converting from the ship-to basis of accounting for
                revenue to other methodologies (See Note 3 – “Revenue
                Recognition”).(b)
            
            Represents
                the recognition of a $25,000 co-op advertising charge by a large
                retail
                customer that was presented by that customer following its year end
                audit.





**NOTE
      3- 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.





F-10
 
  **LEFT
          BEHIND GAMES INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
          the Years Ended March 31, 2007 and 2006**


**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.





**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 7 and 8). 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. 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.




F-11


**LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**


**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.





**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.




F-12


**LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**


**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.





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.




F-13


**LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**


**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.





**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:


•
            Persuasive
                evidence of an arrangement exists: 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
                has occurred: Delivery is considered to occur when the products are
                shipped and risk of loss and reward have been transferred to the
                customer.•
            The
                seller’s price to the buyer is fixed and determinable: If an arrangement
                includes rights of return or rights to refunds without return, revenue
                is
                recognized at the time the amount of future returns or refunds can
                be
                reasonably estimated or at the time when the return privilege has
                substantially expired in accordance with SFAS No. 48, *Revenue
                Recognition When Right of Return Exists*.  If an arrangement
                requires us to rebate or credit a portion of our sales price if the
                customer subsequently reduces its sales price for our product to
                its
                customers, revenue is recognized at the time the amount of future
                price
                concessions can be reasonably estimated, or at the time of customer
                sell-through.•
            Collectibility
                is reasonably assured: 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).





After
      considering (i) the limited sales history of our product, (ii) the limited
      business history with our primary channel partner and largest retail customer
      and (iii) the competitive conditions in the software industry, we determined
      that return privileges and price protection rights granted to our customers
      impact our ability to reasonably estimate sales returns and future price
      concessions, and therefore, we are unable to conclude that our sales
      arrangements have a fixed and determinable price at the time our inventory
      is
      shipped to customers.  As a result, our revenue recognition
      policies are as follows.





F-14
 
  **LEFT
          BEHIND GAMES INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
          the Years Ended March 31, 2007 and 2006**


For
      sales
      to our primary channel partner and largest retail customer, we defer revenue
      recognition until the resale of the products to the end customers, or the
“sell-through method.”  Under sell-through revenue accounting,
      accounts receivable are recognized and inventory is relieved upon shipment
      to
      the channel partner or retail customer as title to the inventory is transferred
      upon shipment, at which point we have a legally enforceable right to collection
      under normal terms. The associated sales and cost of sales are deferred by
      recording “deferred income – product sales” (gross profit margin on these sales)
      as shown on the face of the consolidated balance sheet. When the related product
      is sold by our primary channel partner or our largest retail customer to their
      end customers, we recognize previously deferred income as sales and cost of
      sales.  Our primary channel partner and largest retail customer each
      provide us with sell-through information on a frequent basis regarding sales
      to
      end customers and in-channel inventories.





For
      sales
      to our on-line store customers, revenues are deferred until such time as the
      right of return privilege granted to the customers lapses, which is 30 days
      from
      the date of sale for unopened games.





For
      sales
      to our Christian bookstore customers and all other customers that cannot provide
      us with sell-through information and for which we may accept product returns
      from time to time, revenues are recognized on a cash receipts
      basis.





In
      the
      future, we intend to continue using the sell-through methodology with our
      primary channel partner and largest retail customer.  We also plan to
      continue recognizing sales on our on-line store after a one month lag to allow
      for the right that we have given our on-line customers to return unopened games
      for 30 days.





We
      continue to accumulate historical product return and price concession
      information related to our Christian bookstore customers and all other
      customers.  In future periods, we may elect to return to the accrual
      methodology of recording revenue for those customers upon shipment with
      estimated reserves at which time we believe we can reasonably estimate returns
      and price concessions to these customers based upon our historical
      results.





*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 end 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
      $125,766 (restated) under such types of arrangements.




F-15


**LEFT
      BEHIND GAMES INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**For
      the Years Ended 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-16


**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
      4 - 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 $26,265,560 (restated) and
      $8,608,526 during the years ended March 31, 2007 and 2006, respectively, and
      had
      an accumulated deficit of $35,812,713 (restated) 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
      5 - INVENTORIES**





Inventories
      consisted of the following at March 31, 2007 (restated):





2007Raw
                Materials
            
            $
            318,623Finished
                Goods
            
            
            75,982Total
                Inventories
            
            $
            394,605





There
      were no inventories at March 31, 2006.




F-17




**LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**
 
  **NOTE
      6 - 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
      7 - 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 Ending March 31,
            
            Amount2007
            
            $
            2,7662008
            
            
            2,7662009
            
            
            2,7662010
            
            
            2,7662011
            
            
            2,766




**NOTE
      8 - 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-18




**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.





**NOTE
      9 - 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.




F-19


LEFT
        BEHIND GAMES INC.
 NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS
 For
        the Years Ended March 31, 2007 and 2006
 
  NOTE 10 - INCOME TAXES





The
      provision for income taxes consists of the following for the years ended March
      31:




**2007**
            
            
            **2006**Current:
            
            (restated)Federal
            
            $
            -
            
            
            $
            -State
            
            
            800
            
            
            
            800800
            
            
            
            800Deferred:Federal
            
            
            2,302,000
            
            
            
            623,000State
            
            
            486,000
            
            
            
            106,0002,788,000
            
            
            
            729,000Less change in valuation allowance
            
            
            (2,788,000
            )
            
            
            (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.





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:
            
            (restated)Net
                operating loss carryforwards
            
            $
            3,522,000
            
            
            $
            826,000Deferred
                salaries
            
            
            17,000
            
            
            
            277,000Allowance
                for doubtful accounts
            
            
            28,000
            
            
            
            --Deferred
                rent
            
            
            2,000
            
            
            
            --Depreciable
                and amortizable assets
            
            
            28,000
            
            
            
            --Inventory
                reserves
            
            
            10,000
            
            
            
            --Unearned
                revenue
            
            
            284,000
            
            
            
            --3,891,000
            
            
            
            1,103,000Less valuation allowance
            
            
            (3,891,000
            )
            
            
            (1,103,000
            )Net deferred tax assets
            
            $
            --
            
            
            $
            --




F-20


**LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**




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**(restated)Computed
                tax benefit at federal statutory rate
            
            $
            (8,949,000
            )
            
            $
            (2,927,000
            )State
                income tax benefit, net of federal effect
            
            
            500
            
            
            
            (495,000
            )Increase
                in valuation allowance
            
            
            2,788,000
            
            
            
            729,000Non-deductible
                stock compensation
            
            
            6,537,000
            
            
            
            2,690,900Other
            
            
            (375,700
            )
            
            
            2,900$
            800
            
            
            $
            800





As
      of
      March 31, 2007, the Company had net operating loss carryforwards of
      approximately $8,700,000 (restated) and $8,500,000 (restated) available to
      offset future taxable Federal and state income, respectively. 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
      11 - 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.





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.




F-21
 
  **LEFT
          BEHIND GAMES INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
          the Years Ended March 31, 2007 and 2006**




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 12).





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 9).





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.





**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.




F-22


**LEFT
        BEHIND GAMES INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
        the Years Ended March 31, 2007 and 2006**




**NOTE
      12 - 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








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.





F-23




**LEFT
          BEHIND GAMES INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
          the Years Ended March 31, 2007 and 2006**




**NOTE
      13 - 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-24




**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 17 - 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-25


**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-26


**LEFT
          BEHIND GAMES INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
          the Years Ended March 31, 2007 and 2006**




**NOTE
      14 - 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 affiliate, 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
      15 - 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-27


**LEFT
          BEHIND GAMES INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **For
          the Years Ended March 31, 2007 and 2006**




**NOTE
      16 - 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
      17 - 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 16). 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-28


**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-29


**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